Housing lift triggers buzz for hardware and bulky goods
In turn, demand for these brick and mortar assets is also rising as reflected in the high turnover in sales by Australian and international super funds and private trusts.
In the retail sales data for August, released last week, hardware stores and supplies performed strongly, up 5.6 per cent, against declines in department stores and the hard-hit apparel.
The rises in August continued the positive trends of recent months - 4 per cent in July, 3.6 per cent in June, 5.2 per cent in May and, thanks to the Easter break, a larger 7.5 per cent in April.
According to Stephen McNabb, the head of research for Australia at CBRE, bulky goods centre transactions represented more than $600 million of the $1.5 billion of retail transactions in the quarter, the second largest quarter since 2007.
"Improvements in domestic housing fundamentals and a re-acceleration of population growth are expected to support rent growth within the bulky goods sector in the latter half of 2014 (in most states), following a generally soft environment in recent years," he said in the group's latest results for the third quarter of 2013.
"These expectations may support further sales activity and a stabilised to improved outlook for yields in the sector, relative to 'prime' retail assets."
One of the larger sales of assets was by Charter Hall of Home HQ Nunawading for $48 million to the private Arkadia investment group.
The Australian head of retail investments at Jones Lang LaSalle, Simon Rooney, who advised Charter Hall on the sale, said yields in the bulky goods sector remained high by historical standards, and offered investors potentially attractive returns for those willing to move up the risk curve and take a counter-cyclical position.
"Major players include Brett Blundy (BBRC), Arkadia, Sentinel and more recently Altis and Blackstone," Mr Rooney said.
According to Jones Lang LaSalle Research, the drivers of the bulky goods sector are improving. It says the cuts to official interest rates are positive for a recovery in residential construction, which is a key driver of the performance of the bulky goods market, and also have positive implications for the broader retail sector.
At Moelis & Co, the economist John Barrett said there was a definite correlation between house sales and a rise in demand for retail, including bulky goods.
Frequently Asked Questions about this Article…
The article says an improving residential sector — more new home owners and renovators — is driving demand for hardware and bulky goods. Retail sales data showed hardware stores and supplies rose 5.6% in August, continuing monthly gains in recent months as house sales and renovation activity lift spending on items from paint and tools to couches and washing machines.
According to CBRE's head of research in Australia, bulky goods centre transactions accounted for more than $600 million of the $1.5 billion in retail transactions in the quarter — the second-largest quarter of retail transactions since 2007 — signalling strong investor interest in these brick-and-mortar assets.
The article notes Charter Hall sold Home HQ Nunawading for $48 million to private buyer Arkadia, a deal advised by Jones Lang LaSalle. That sale demonstrates institutional and private appetite for bulky goods assets and highlights active trading in the sector as investors reposition into these properties.
Jones Lang LaSalle’s Australian head of retail investments said bulky goods yields remain high by historical standards. For everyday investors that can mean potentially attractive returns, but JLL also cautions this tends to suit those prepared to move up the risk curve and take a counter‑cyclical position.
The article lists several major participants including Brett Blundy (BBRC), Arkadia, Sentinel, Altis and Blackstone, along with institutional sellers like Charter Hall and advisers such as Jones Lang LaSalle and CBRE.
Jones Lang LaSalle Research in the article says cuts to official interest rates are positive for a recovery in residential construction — a key driver of bulky goods demand — and therefore can have favourable implications for the broader retail sector and rental growth in bulky goods centres.
Yes. The economist John Barrett at Moelis & Co is quoted saying there is a definite correlation between house sales and a rise in demand for retail, including bulky goods, because home purchases and renovations typically drive spending on furniture, appliances and home improvement products.
Based on the article, investors should note improving housing fundamentals, expected rent growth in the bulky goods sector, active transaction volumes and relatively high yields versus history. However, the article also implies these opportunities can be counter‑cyclical and may carry higher risk, so everyday investors should weigh yield versus risk and consider professional advice before investing.
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