Vacancy Factor For Industrial Remains Low

I’m not sure if anyone other than the mum and dad retailers etching an existence selling you and me their wares, or their landlords, are noticing the changes eating away at their very retail existence.

The changes are multifaceted and have just started to attract the attention of mainstream media as shops disappear from the traditional shopping strips such as Darby Street and The Junction and even the shopping centres. They are calling them ghost shops.

THE CHANGING FACES OF RETAIL

It’s not the first time we have seen the delivery of retail change. Many of you will have seen photos from the 1950’s of the vibrant streets featuring famous names such as Waltons, Gowings, Grace Bros, Mark Foys , Marcus Clark or The Co-op Store in Newcastle.

These retailers lent their weight to shopping strips such as Hunter Street and many other main streets throughout Australia. Along the strips, there were hundreds of landlords at differing stages of their own lives and with varying financial needs. These landlords negotiated leases based on their financial requirements, while some lucky retailers also owned their buildings.

Then came the shopping centres owned by a single landlord. These centres modelled themselves somewhat on the town squares of Europe. The first was the Southdale Shopping Centre in Minnesota in 1956. A year later, Australia launched its first shopping centre – the Chermside Drive-In Shopping Centre in Brisbane. It wasn’t until 1965 that Woolworth’s Kotara Fair opened to service the Newcastle community. When centres in Jesmond and Charlestown followed, it was the beginning of Hunter Street’s decline.
Now retailing is changing again, and this time the bricks and mortar shop operators are under attack from:

  • The low-cost online retailers operating overseas, at home or in cheap industrial areas
  • The Councils love of shop top housing that’s creating even more retail floor space at ground level
  • The State Government’s land tax and the rating structures that councils are imposing, which are unsustainable and an unwarranted financial drain on landlords. Worse this burden is being passed onto the retailers.
  • The city of Newcastle’s failure to protect car parking that is sacrosanct for a city with a dysfunctional bus, train, tram and ferry network.
LANDLORDS NEED EXPERIENCE IN CHANGING TIMES

At Raine & Horne Commercial, we are having success attracting tenants when retail landlords are willing to listen. To attract quality tenants, landlords must:

  • tidy up their buildings and make them look clean and loved
  • reduce rents – some landlords need to drop the rents by 25% plus offer special incentives.
MORE GOVERNMENT CHALLENGES

The NSW Government and the City of Newcastle will cause the next round of challenges for landlords and retailers within the CBD. The state government and Newcastle Council are planning to withdraw workers from the traditional parts of the city and transfer them to space in Newcastle West. Not only will the landlords owning the soon to be vacant 18,000 square metres of floor space suffer, the ripple effect will act like a tsunami on the retailers currently providing services to these government employees.

I felt like a lone voice before the start of the light rail project. I was castigated for being negative about the effects on businesses and landlords, yet we will see an even greater impact with the move of government employees away from the CBD. It’s another watch this space moment as the nepotism of governments feathering their nests for vague business and development deals will bite the CBD hard and for a decade to come.

THERE IS MORE TO NEWCASTLE COMMERCIAL REAL ESTATE THAN THE CBD

Fortunately, most of the economic grunt occurs outside the CBD and in particular the industrial suburbs. The latest Raine & Horne Industrial Average for the region shows a slight rise in vacancies for industrial property of 0.75% since January with the vacancy factor sitting at a very healthy 4.87%.

There was mixed results across the major suburbs with vacancies falling in four areas, including Cardiff (2.26%), Tomago/Hexham (0.41%), Mayfield West (0.36%) and Carrington (0.17%). The other seven significant centres all recorded rises with Beresfield the largest at 5.19%.

Post written by Steve Dick
0425 302 771
steve@rhplus.com.au

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