Commercial Property Projections for 2018

1. Continued flight to quality

During the last few years the fear of missing out has led inexperienced investors to purchasing almost any property that their budget would allow, and they have been fortunate as a rising tide lifted all ships.

In 2018 we expect to see a flight to quality with most investors seeking well located property, with national tenants on long leases. Secondary properties are more likely to spend more time on the market as buyers are increasingly more selective.

2. A widening Leasing Spreads

The leasing spread is a measure of the difference between rent per square metre that can be achieved on a new lease, compared to the rent per square metre that was previously paid for the same space.

Food, office and warehouse premises are experiencing the strongest uplift in rental, whilst retail remains level.

3. Upgrading of Property Features

More often than not, tenants are seeking quality premises over discounted price. Tenants expect the premises to be a reflection of their business and will generally pay the higher rent value for a more aesthetic property. Features such as modern presentation, good natural light, LED energy efficient lighting, secure or undercover parking, fresh amenities and efficient inverter low energy air conditioning units are all high on tenants list of options.

4. Bricks over clicks

Online shopping might be attracting more buyers, but bricks-and-mortar retailers are uniting technology with physical experiences in new ways with growing success.

The difference is “shopping” and “buying”. The growth in online is in the “buying space”. The activity of buying is typically about best price, range, assortments and maximum convenience. This is the fertile ground for e-commerce and where Amazon and Alibaba plays – representing largely where online growth is coming from.

Shopping is experiential, human, tactile, interesting, exciting, fun, social, interactive, rewarding and the shops are pivotal. It is clear to see the retailers (including restaurants) who can see the difference and stand out due to their impressive shop fit outs.

Consumers don’t want or have tolerance for boring retail any more, with too many other options and consequentially, boring retail is painfully dying.

Vibrant, strong experiential brands continue to grow and write strong business. Many retailers who are old, boring, undifferentiated, unfit and under-invested could potentially close in 2018, while many fit, innovative, clever, retailers will open.

We noted in a recent article from the Inside Retail publication on January 8th, 2018, that there are approximately 75,000 retail shops in Australia at present – that equates one shop for every 320 people. We are currently third per capita to the USA and Canada in shopping density. So being remarkable in this density requires greater strategic planning and market awareness/relevance.

So, we see increasing store openings and great retail brands (Apple, Costco, Sephora, etc ) continuing to thrive, with their overwhelming investment in bricks and mortar stores. It is adaptation and innovation that will see business growth.

If you would like to discuss the above or have a commercial property which you are looking to sell or lease, please feel free to call the office on 6584 0544.

Update - February 2018