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REIQ Journal : August 2008
Commercial & Industrial The changing definition of By Herron Todd White Not too many years ago, retail investment was dominated by high-level professional investors willing to carry risks tempered by their intimate knowledge of how commercial property operates. In this environment, a large number of general investors were shut out as they felt more comfortable putting their money into a sector that was easily understood – residential. FAST FORWARD A few years and the limitations “mum and dad” investors placed on themselves have dissipated. Direct commercial property investment has become more accessible to everyone as the level of professional advice has improved. Over the last six to 12 months the volatility of the world economy has begun to permeate into the Australian debt and equity markets. However, the underlying fundamentals of the economy have remained strong and are typical of an expansionary economy. In 2008 we are beginning to see yields ease, although there is still significant interest in substantial, good quality investment property, in particular from private investors. Astute potential investors appear to be most interested in those properties that display largely national tenants with proven track records. Good quality property with compounding income growth over time is seen as a sound investment strategy and we would expect this trend to continue. Retail The retail property market is directly linked to consumer spending with the positive drivers in retail spending including employment, wages, migration and consumer confidence. The graph below illustrates the overall retail turnover in Queensland that has steadily increased each year over the past seven years, but is now showing a slight downturn due to inflationary pressures impacting on disposable income. We have seen steady rental growth in retail properties in line with the overall growth in spending. Prime yields within Brisbane tend to fall within 6.25 per cent to 7.25 per cent. Keener yields are normally associated with properties that have redevelopment potential and/or significant potential for rental growth. We are expecting yields to ease in 2008 and rents to remain stable. QLD Seasonally Adjusted Retail Turnover QLD Seasonally Adjusted Retail Turnover 47 Date REIQ Journal August 2008 Total Turnover ($ Millions)