This article is from the Australian Property Journal archive
Queensland bulky goods sector has continued strongly and shows no signs of abating with sales topping $1.2 billion in the 12 months to June 30, 2006, according to the latest research from Landmark White.
According to LMW, the sector has continued to expand despite a fall in retail spending for household goods and a softening residential market. LMW has been monitoring new retail supply in 2006 and during this year approximately 200,000 sqm is under construction as part of 36 projects to be completed by 2007.
Research shows that the bulky goods sector in Queensland continues to expand with new supply being readily absorbed by tenants and investors.
According to LMW, growth in bulky goods rentals has outpaced traditional retail rents and strong institutional investor demand has tightened yields considerably.
In Greater Brisbane, there is currently over $120 million worth of projects under construction, the most significant being the Ikea Retail Warehouse (28,000 sqm) in Logan and the Homemaker Centre attached to the Wynnum Plaza Shopping Centre, both of which are expected to be completed in 2007.
Other projects outside Greater Brisbane include Airlie Central in the Whitsundays and the Domain Central development in Townsville.
LMW said while tenant demand for the additional bulky goods space coming onto the market may be fragile as household expenditure falls, the increased focus on lifestyle retailing and the lower rental cost in the bulky goods sector is expected to keep rental growing at a fairly stable rate.
LMW expects rental growth will slow as a result of the housing market slowdown, rising interest rates and increases to petrol price.
According to LMW, currently average yields range between 7.25% and 9.25%, with some prime stock achieving yields below and at the lower end of this range – including the $92 million Springwood Megacentre, which was purchased by Mirvac on a yield of 7.25%.
On the Sunshine Coast, Valad Property Group pre-purchased the proposed 33,000 sqm Home Central Kawana, with an estimated end value of circa $87 million on a yield of 7.37%.
LMY said older showroom type bulky goods space not well located on main arterial roads is a good example of centres at the upper yield range. The indicative yield for bulky goods product is currently at 7.88%.
In the year to June 2006, retail sales greater than $5 million in Queensland totalled $1.276 billion. The most recent transactions of note include the Browns Plains Homemaker Centre in southern Brisbane reportedly for $45 million and Centro Home, Gladstone for $28.3 million with a reported yield of 7.50%.
It is currently a development site with approval for 21,000 sqm of space anchored by Bunnings with a completion date of mid 2007. Over this period, bulky goods centre sales represented only 10% of total value of retail properties sold. This can be attributed to the lack of quality bulky goods retail stock available to the market, as only nine centres were purchased over these 12 months.
Looking ahead, LMW said a robust level of supply of new bulky good centres is likely to continue and rents are likely to remain stable. However there is scope for some limited growth, (albeit off a low base) this will be due to the current environment of lowered discretionary spending due to the rise of interest rates and increased fuel costs.
LMW said the indicative yield for bulky goods product is currently at 7.88%.
“It is somewhat doubtful whether there will be any further tightening in yields given rising interest rates and notwithstanding the weight of money seeking this form of investment.
“Looking ahead new bulky goods supply is likely to continue particularly in growing residential areas which will benefit from the additional retail infrastructure,” the research concluded.
By Kathryn O’Meara
