New property baby looks bulky

THE bulky goods retail property market is set to be the new baby of the property industry if forecasts by investment analyst BIS Shrapnel prove correct.

The bulky goods/warehouse-style market, typified by stores such as Harvey Norman, is in an infancy comparable to that of regional retail shopping centres in the 1970s and 1980s, BIS Shrapnel said.

Jones Lang LaSalle research manager Frank Sorgiovanni said the sector had picked up over the past two years but was likely to slow in the coming year along with the rest of the retail sector.

“It’s a trend that has taken off directly from the east, and now Adelaide is also creating interest,” Mr Sorgiovanni said.

The recent attention the bulky market sector has received stems from increasing consumer willingness to shop for major household items at bulky goods outlets rather than traditional department stores.

Bulky Goods Retailing: Property Prospects 1999-2004 author Maria Lee said: “We are witnessing a fundamental retail shift from the older showrooms to the new bulky goods centres which are rapidly gaining consumer acceptance.”

The consumer market for bulky goods products is estimated to be worth nearly $26 billion annually.

Demand has grown strongly, fuelled by changes in household size and structure, the home improvement boom and the strength of consumer spending according to the report.

“We expect bulky goods retail expenditure to grow at a rate substantially above the 2.4 per cent forecast for retail as a whole,” it commented.

“Bulky goods centres and the newer types of freestanding accommodation account for only a minority of total bulky goods turnover.”

Ms Lee said supply would lead demand for bulky good products.

“The sector is currently booming and this boom should last for the next one or two years.

“Growth in demand, transfer of market share and retailer expansion are underpinning the new construction and it is unlikely the market will be oversupplied in the next five years.”

The increase in the sector’s share of the retail market is forcing investors to sit up and take notice.

“The market – including institutions – now accepts bulky goods property as a legitimate investment alternative and yields have firmed accordingly,” Ms Lee said.

“We expect growth will continue and bulky goods property will offer handsome returns in both rents and capital gains over the next five years.”

Ms Lee said developers and owners of bulky good outlets are already showing signs of grasping a slice of the increase in retail turnover levels.

“The overall strength of demand, combined with the fact that the strongest growth will take place in those sectors with above average retail productivity (turnover per square metre), will drive this rental growth,” she said.

Over the next five years warehouse-bulky good stores are expected to out-perform all other forms of retail assets.

Whereas bulky good store turnover is expected to climb 5 per cent during the current year, general retail turnover is expected to increase only 3.7 per cent in the current year to June 2000 according to the analyst.

“While yields have already firmed, this process has further to run,” Ms Lee said.

“Rates of return will be highly attractive when compared with other property sectors.”

The study, however, warns of several risks.

Among them greater volatility than other sectors, variable demand from one product group to another, and rising vacancies during the expected economic downturn of 2001-02.

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