Now is the time to invest in high street retail.
Many have said the Internet will kill bricks and mortar retailers. But I beg to differ.
Look at the biggest companies in retail over the past 10 years, Zara, H&M and Topshop. They all dominate the high street.
These guys are transforming retail and it gives novice investors like us an opportunity to get into the market. I will explain.
You see, these big brands are magnets for customers. They spend heaps of time selecting where to set up shop, then pump lots of money into marketing and finally attract lots of customers.
There are big budgets, lots of smart well-dressed educated people crunching the numbers on the best retail locations around the country.
When they finally set up and start trading, it causes an overflow of customers. All other retailers benefit from being close to giants.
What's the old saying? “A rising tide lifts all boats”
All the marketing, money and magnetism helps everyone else get more customers and make more sales. As the tenants do well, the property values increase.
While some retailers love the giants, others hate them. They buy cheaper and it makes it harder to compete… Imagine a competitor moving in next door and taking all your business. (not that necessarily happens)
So some retailers run for the hills. In this case, the hills are the high streets.
As investors, these are our opportunities.
So we have two options.
Firstly, across Melbourne, Sydney, Brisbane and Adelaide, the giants have moved in.
Retailers are looking for property close to these magnets.
We need to find affordable properties close to the big giants that are undervalued. Again use your imagination, look for something dirty dusty and in need of a Reno.
Just remember these giants will be around for the next 10-15 years so you have time to scope something out.
Secondly, retailers are moving back to the high street. But these high streets are not the typical Chapel, Oxfords, and Rundle Malls
Penny-pinching retailers are moving to local high streets in Byron, Fitzroy, and Newtown.
It doesn’t take a scientist to see the Country Roads, Kookais, Bonds popping up in the ‘new’ ‘hip’ suburbs.
But I will also let you in on an insider tip. Once these Fashionable types move in, they are usually followed by the foodies.
Grill’d, Spud Bar, Pie Face, and Sushi Sushi are all going to need a trading space.
Those who shop, need to eat.
Our advantage is people are not investing in retail at the moment. People still think this Internet thing is going to take off.
But I hear you ask? There are 1000’s of high streets around the country – how do I pick the next hot spot?
So here is my advice.
Next time you or your other half needs to do some shopping. Change your perspective, look around and see if you can spot some new retailers.
Think trendy Country Road, Witchery and Grill’d.
This may be the tell tale sign its time to get into a retail property. Pop into the local agents and tell them what you're looking for. Find out the Cap rates and start to familiarise yourself what the area.
Hand in hand with this move there can sometimes be opportunities with the local council as they expand commercial zoning.
I have seen times when whole blocks of houses suddenly change to commercial zoning because they are at the end of a strip of shops…
And almost no one knows about it because the house owners are just going about their business… oblivious.
Point it… sometimes it's worth asking questions.