Retail

Retail property refers to real estate that is designed and used for commercial retail activities. This can include spaces like shopping centres, high street shops, retail parks and standalone stores. Whether you’re looking to occupy the space as a business or invest in the property to generate rental income, retail property is a versatile option in the commercial real estate market.

In recent years, the retail sector has faced some challenges due to the rise of ecommerce, shifting consumer behaviour, and the impact of economic factors such as high interest rates and inflation. However, the retail property market has shown resilience, especially in high-demand locations such as inner-city areas and major shopping precincts. As such, buying retail property continues to be an attractive option for those looking to diversify their portfolio.
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What is the future of
retail property?

Retail property is changing as trends like experiential shopping and omnichannel strategies reshape the sector. More retailers are focusing on creating in-store experiences that can’t be replicated online, such as interactive product demonstrations and personalised customer service. Shopping centres, once solely about transactions, are transforming into social and entertainment hubs, adding another layer of resilience to this asset class.

Looking ahead, mixed-use developments and retail properties that are adaptable and located in high-traffic, well-connected areas will remain strong contenders in the commercial property market. This approach maximises foot traffic and allows retail spaces to thrive by serving the everyday needs of the local community.

Why buy
retail property?

For owner-occupiers, buying retail property offers several advantages. Owning your business premises provides stability, shielding you from fluctuating rental prices and lease uncertainties. You can also customise the space to suit your operational needs without worrying about landlord approval. Additionally, you’ll benefit from any future capital appreciation if your property is in a growth area. You can also use the property as collateral to finance future expansion.

For investors, retail properties offer a potentially steady stream of rental income. Unlike residential property, commercial leases typically last longer, with tenants often paying for many of the outgoings (such as maintenance and rates). Yields can be higher compared to residential investments, making it an attractive option for those looking to diversify their portfolio. Additionally, many retail leases include annual rental increases, providing consistent growth in returns.

Investing in retail properties in prime locations can also achieve strong capital gains, particularly if they’re located near transport hubs or in areas undergoing redevelopment or experiencing population growth.

It’s essential to understand the risks involved before investing in retail property. Economic downturns, shifts in consumer behaviour or the financial instability of tenants can affect rental income. Understanding the dynamics of the retail market and choosing a property in a resilient location is crucial to mitigating these risks.

Understanding the risks involved is crucial when investing in retail property. Economic downturns, shifts in consumer behaviour or the financial instability of tenants can all impact rental income. However, by carefully analysing the local retail market and selecting the right property in the right location, you can better manage these challenges.

To maximise your return on your retail property investment, consider looking for assets in high-growth areas with long-term leasing opportunities. Proactively managing the property, including maintaining good tenant relationships, will also ensure steady rental income. You can also add value to your property by upgrading the facilities or repurposing spaces to attract a broader range of tenants.

What are the key considerations when buying
retail property investment?

When buying retail property, certain factors play a big role in the success of your investment or business operations:

  • Strata title: If the retail property is part of a strata-titled development, you’ll need to factor in strata levies and be prepared for potential restrictions on how you can use or modify the space.
  • Location: Proximity to transport hubs, high foot traffic areas or growing suburbs can influence a retail property investment’s success. A well-located retail property can attract consistent customers, leading to higher rents and lower vacancy rates.
  • Zoning: Ensure the property’s zoning permits the type of retail activity you plan to operate or lease. Certain areas may have restrictions that limit what can be done on the premises.
  • Existing lease agreements: If the property already has tenants, review the lease terms closely. Check for details like the length of the lease, rent increases and renewal clauses. Strong tenants with long leases provide income security, but unfavourable terms can hinder your ability to adapt or reposition the property.
  • Vacancy rates: Understanding the vacancy rates in the area can help you assess the risk of tenant turnover. High vacancy rates might indicate that demand for retail space is low, which could affect your ability to lease the property.
  • Stamp duty: Don’t forget that stamp duty on commercial property purchases can significantly impact your budget, so plan accordingly.

Why buy with
Costi Cohen?

While buying retail property can be a lucrative investment, doing it yourself can be fraught with challenges. Misjudging market trends, choosing the wrong location or misunderstanding lease agreements can lead to costly mistakes. This is where working with a professional commercial buyer’s agent like Costi Cohen can make all the difference. As one of Australia’s leading commercial buyer’s agencies, Costi Cohen offers expert advice and support throughout the buying process. We have extensive experience in the retail property sector and have a vast network of industry contacts that gives you access to off-market opportunities.
Our process begins with a thorough understanding of your objectives, whether you’re an investor looking for strong returns or an owner-occupier seeking the ideal location for your business. We conduct in-depth market research, vet potential properties, negotiate favourable terms and ensure the entire process runs smoothly. With Costi Cohen on your side, you minimise risk and maximise your chances of success.

How to finance the purchase of
retail property

Financing a retail property investment is different from a residential property. Commercial property loans generally require a higher deposit, often around 30-40% of the purchase price. The interest rates can also be higher, reflecting the higher risks involved. However, there are ways to make financing more accessible.

Your loan options will depend on factors like the property’s location, tenant profile and the strength of existing leases. At Costi Cohen, we can connect you to trusted finance professionals who can help you explore retail financing solutions that match your goals and financial situation.

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Costi Cohen — Australia’s premier commercial real estate consultants

Whether you’re a seasoned investor or new to the market, our expertise will pave the way for your success in commercial real estate. We’ve looked after more than 250 commercial properties and are prepared to help you discover your next investment opportunity. 

No matter your timeline, budget or preferred location, the expert team at Costi Cohen can help you find a commercial property that aligns with your needs. We invite you to get in touch with our team for a consultation today.

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