Predicting booms in commercial using resi trends

[Bird Dog]

So I've been reading the latest copy of "your investment property" which had their latest "investor of the year awards" and I couldn’t help but notice there was a strong theme of mining town properties amongst the nominee's portfolios...
I recall reading a study a while back that touched on using boom type growth in resi against commercial predictions.
Now I know that both are normally subject to significantly different cycles both in length and influence however the author raised the idea of increased population resulting in increasing commercial demand.
Specifically, if an area such as Gladstone experienced unprecedented growth in residential, would this have a direct and measureable impact on commercial in the same area. EG More houses = more people = more commercial properties required to service those people.
I know this question sounds rather simplistic however what I really want to confirm is if it exists and also how do you…
1: Measure it?
2: More importantly, can you use the housing boom as a catalyst for more commercial and get in early?
3: Where the hell can I find related articles as we all know, commercial data is somewhat lacking?

Logic would dictate you will need more retail (that goes without saying) but what about office and industrial.

Put plainly…. Could you argue that Gladstone will require more commercial given the ongoing housing shortage and therefore purchase commercial now before it eventually starts going nuts like the rest of the town..?

 

[Edge7]

Hi Bird Dog,

You could be on to something there. Sure, it is not that hard to research which companies will be operating in Gladstone for instance. The hard part is knowing if they will actually lease an office or industrial premise or perhaps build their own.

McDonalds (food retail) as most know are the masters at this sort of thing.

 

[Ausprop]

it can get pretty messed up with yields in these towns to the extent that resi exceeds comm

 

[Bird Dog]

Hi Bird Dog,

The hard part is knowing if they will actually lease an office or industrial premise or perhaps build their own.

I suspect the old theory "birds of a feather" might apply there edge and they may congregate in a similar manner as has been indicated in Perth (I can't recall the city streets).
So it will depend on whats available I guess!

As I was saying to someone today, I don't think you could go to wrong with anything abutting the port area (of Gladstone that is).

 

[Bird Dog]

it can get pretty messed up with yields in these towns to the extent that resi exceeds comm

Yes, pretty scary yields indeed Prop..
Pretty much throws the rule book out the window which in theory, should make me walk away but I thought it might be an interesting subject to discuss.

B.D

 

[Scott No Mates]

You will need to understand what is driving demand for housing & how that impacts commercial usages. Are residents fly in/ fly out? Are they predominantly employed at the mines? Is there a need for other services to be provided locally, regionally or will they continue to utilise those in major centres?

 

[Bird Dog]

You will need to understand what is driving demand for housing & how that impacts commercial usages. Are residents fly in/ fly out? Are they predominantly employed at the mines? Is there a need for other services to be provided locally, regionally or will they continue to utilise those in major centres?

All very valid points Scotty..

Re FIFO (fly in fly out) that is kinda answered by the housing shortage and whilst many mines set up camps, this doesn't represent all staff hence the need for some of the ridiculious corporate amounts being bandied around.

Gladstone is obviously a significant mining town although it does have a burgeoning tourist industry and is located along the coast hence it's popularity with investors in this forum.

I would imagine that even with the mines providing a lot of infrastructure, there would still be other services such as retail, office and industrial.
EG: Retail:clothing, Office: legal, Industrial: automotive services. I'm sure there's loads more but the bigger a town get's, the more services are required that a mining company simply cannot provide.

As Edge has stated, one of many indicators might be McDonalds food services, and maybe even a bunnings..

The question being though.. at what point can you start using these indicators as a useful tool..

 

[Dazz]

The question being though.. at what point can you start using these indicators as a useful tool..

As with everything Bird Dog, risk equals reward.

Soooo, if you wish to enjoy a big reward, you'll need to take a big risk....which means you'll need to jump in and be Johnny-on-the-spot before all of the players arrive. You won't have many indicators to rely upon.

Sitting back waiting and waiting for all of the "indicators" to fall into place will certainly reduce your risk if you decide to jump in, but commensurately, it will also reduce your reward....as obviously your buy-in price will be thru the roof with less growth to follow if you wait too long.


This game is like picking a race-horse from the yearling sales, or picking up a Pro Hart for $ 50 in Broken Hill back in '68 when no-one knew him.

Waiting and waiting for all of the indicators, until the race-horse has won 2 Melbourne Cups or Pro Hart has established a world-wide reputation and then died so supply of artwork has ceased.....isn't much chop of a game plan.

 

[Elizabeth L]

Dazz - you are certainly a master of historical and financial analogies. Interesting reading as always.
Cheers
Elizabeth

 

[Bird Dog]

As with everything Bird Dog, risk equals reward..

Of course! This rule seems to be one of the very few that remains relatively consistent when investing.

Waiting and waiting for all of the indicators, until the race-horse has won 2 Melbourne Cups or Pro Hart has established a world-wide reputation and then died so supply of artwork has ceased.....isn't much chop of a game plan.

Thank you for your assumptions about my game plan Dazz however I'm not sure how you drew them from a single question?

For the record...our last CIP purchase did involve an element of speculation around the future development of arterial roads however the fundamentals still remained.

* Close to Melb CBD
* Lack of available stock in the immediate area
* "Land locked" where there was no further industrial likely to ever be released
* Future rezoning and development potential
* etc
* etc
* etc

Hardly anything like picking a race horse from the thousands of mules that are traded every year. For the record, I choose not to gamble on such poor odds as every race horse owner I've ever know (personally) has never ended up ahead.
I was merely asking if forumites could draw any indicators from resi when doing your CIP DD in a given area such as Gladstone.

Of course, waiting for the Bunnings would mean you are well behind the traditional "speculators" however my original question was this..

I know this question sounds rather simplistic however what I really want to confirm is if it exists and also how do you…
1: Measure it?
2: More importantly, can you use the housing boom as a catalyst for more commercial and get in early?
3: Where the hell can I find related articles as we all know, commercial data is somewhat lacking?