re:- The Woolies & McDonalds Principle
- Thread starter kero
- Start date
kero said:Read & heard from somewhere that the suburbs that has any of the two mega players are good signs that the suburbs will do well... has anyone heard something similar & know investors that have followed such a principle? not sure why coles is not included.
This may be appropriate for some areas but not all.
The appearance of say a K-mart or Bunnings in a country town may indicate there is confidence about its future (although some local businesses might be worried).
Ditto for an outer suburb, which is becoming increasingly relevant as a 'central place'. For example Werribee and Narre Warren is attracting business, central Laverton has lost businesses.
At the middle to top end of the market (especially in inner suburbs) it's a different story. Land is too expensive for 'big box' stores like Bunnings and though there may be renovators, there isn't the builders/tradesmen market there is in outer suburbs (refer to census stats for people with trade quals). And people have higher tastes than McDonalds. There may also be a preference for local rather than 'big chain' shops, though some like Borders seem to do well.
Though urban decline is less noticeable in metropolitan areas (where there are alternative centres within 5km and people don't move out) it certainly happens.
Moorabbin, though on the face of it a well-located middle-class suburb, is one example of an ageing, tatty and failing centre that has lost importance to nearby rivals such as Bentleigh (which is booming, even without a Bunnings).
Moorabbin's local council was amalgamated and Ikea (surely of no less status than a Bunnings or Target) shut down. Local shops are ordinary. There's a larger than normal number of working-aged people wondering around the railway station with nothing to do.
The multi-storey buildings there indicate that at one time government and/or developers had big plans for Moorabbin as a major centre but it didn't last. One could cite Southland, but the local strips of Highett and Cheltenham (which are even closer) seem to be doing better.
So what the big national or multinational storekeeper can giveth, he can also taketh. And if this happens the results can be damaging.
Peter
Hi kero,
If you are from Perth, have a quick drive through Nedlands suburb.....there's absolutely not a jot of anything you speak of ;
There isn't a Woolies / Coles / McDonald's / Hungry Jacks / Pizza Hut / KFC / Red Rooster / Chicken Treat / Domino's Pizza......absolutely nothing.
With Stirling Hwy cutting the suburb in half, and with enormous traffic loads every day linking Freo to Perth....you'd think one of these companies would plonk one of their outlets there.
Indeed, they have them all lined up on the border of Nedlands, falling over themselves in Claremont, but not a jot in Nedlands.
The Councillors on the Council decided they wouldn't approve an application for any of them, and that policy hasn't been challenged. It's a case of 'begone crass modern fat factories', and 'welcome to the local business structure trying to make a go of it'.
Nedlands medium house price has gone from 408K in '99 up to 1.1MM in '06.
The dearth of fast food outlets has not hindered the capital growth observed at all.
Cheers.
If you are from Perth, have a quick drive through Nedlands suburb.....there's absolutely not a jot of anything you speak of ;
There isn't a Woolies / Coles / McDonald's / Hungry Jacks / Pizza Hut / KFC / Red Rooster / Chicken Treat / Domino's Pizza......absolutely nothing.
With Stirling Hwy cutting the suburb in half, and with enormous traffic loads every day linking Freo to Perth....you'd think one of these companies would plonk one of their outlets there.
Indeed, they have them all lined up on the border of Nedlands, falling over themselves in Claremont, but not a jot in Nedlands.
The Councillors on the Council decided they wouldn't approve an application for any of them, and that policy hasn't been challenged. It's a case of 'begone crass modern fat factories', and 'welcome to the local business structure trying to make a go of it'.
Nedlands medium house price has gone from 408K in '99 up to 1.1MM in '06.
The dearth of fast food outlets has not hindered the capital growth observed at all.
Cheers.
kero said:Read & heard from somewhere that the suburbs that has any of the two mega players are good signs that the suburbs will do well... has anyone heard something similar & know investors that have followed such a principle? not sure why coles is not included.
Hi Kero,
A quick tip for any newbies or others who dont already know, that want some quick short to mid term CG from an area -
When I started out to build my property portfolio I looked to purchase where the Government & Commercial / Retail/ Private sectors are / were injecting money into an area and got in there ASAP.
Look to where a Government Redevelopment Authority has been created and $Megga$ allocated for it.
Once these sectors are moving, in the sign posts are lit up and the area becomes attractive - thus demand increases as people start moving in!
I have purchased property in these type areas and all of them experienced fantastic short-med term CG to be able to leverage off onto further investments.
This is how I have been able to keep purchasing.
Hope this has provided you & everyone else with some food for thought.
Rixter said:
Redevelopment authorities seem to be established for three types of development:
(i) inner-city (eg Subiaco or East Perth)
(ii) outer suburban new growth centres (Joondalup & possibly Cockburn)
(iii) established but tired low socio-economic outer suburbs (Armadale & Midland)
In the case of (iii) these poorer areas tend to have their property boom near the end of the cycle when they are the only suburbs many can afford.
We had the same thing in Melbourne; poor outer areas like Melton, Seaford, Dandenong and Frankston were late boomers. And this happened without a redevelopment authority.
If their redevelopment coincides with this stage of the property boom then I can see how these areas may experience a double-whammy and experience excellent short-term growth.
Rixter, do you attribute most of your success here to good timing or that there was a redevelopment mooted?
Here in Melbourne various suburban hubs have been named Transit cities, eg Frankston, Broadmeadows, Dandenong, etc.
I would be worried if a government authority is promoting redevelopment but there is low take-up by the private sector (who consider that they can make money at lower risk elsewhere). Every city will always have its low socio-economic areas, and without private capital, I'm not sure if government programs on their own can turn this around for places like Dandenong.
Yes, Perth has had Karawara (next to posh South Perth) and Melbourne has Ashwood/Chadstone (next to posh East Malvern) but I don't know the future of places like Broadmeadows and Dandenong.
Admittedly Broadmeadows seems to be a little cheaper than Doveton (Dandenong) now (when I last looked Doveton was cheaper) so the Dandenong redevelopment and the freeway might have had a small influence, but in a generally flat market it seems to be different to the Midland or Armadale situation.
Peter
Hi Kero
The principle is sound, but not reliant on any particular branding to be effective.
When I set up my first retail business in 1994 it was in a pedestrian arcade off a main street. This had very limited visibility but somehow the business became established and was even starting to develop some standing in the community despite being almost hidden. The rest of the main street traders complained that business was very bad because of the pokies / the extension of the nearby shopping complex / because it was Tuesday.
After two years I moved the business out on to the main street, and in that time I had already noticed a significant change in spending patterns. The mobile phone was draining away discretionary spending. The $20 which would have been spent in my shop was being spent on phone calls, and you can’t spend it twice!
In the twelve years since I have been involved with this shopping strip of 108 shops, I have seen the strip shopping centres come in from the cold. This has been largely due to State Government initiatives such as the ‘Street Life!’ programs, special rates levies for advertising and management programs and other such incentives. Once again, the small specialist shops are providing what the shopping malls can’t do: direct parking, small ranges of stock (something different), and a feeling of being part of a local community.
In that twelve years we have seen the Mother of all booms and the aftermath of a gentle landing. In the area around one of the oldest shopping strips in Melbourne (Croydon) property values have risen along with the rest of the state despite no clearly identifiable ‘lead tenant’ in the strip and nothing remarkable about median family incomes.
A healthy economic community has certain parameters, some of which are the presence of the four major banks, public transport (hopefully train and bus although busses alone will do), a post office, and at least one other government or para-government facility such as a council service centre, library, medicare office, tab agency etc.
Stores requiring large land holdings are often positioned because of site visibility, and the ability to buy the land cheaply ahead of other local development. As with all businesses, the big kids are still taking a punt that their locality will be the right one. But if not, they will just move along until they find the place where they will see the most growth.
If Ikea or Wesfarmers have to cut their losses or adapt to changing demographics, that is really somewhat different to a small investor wanting to buy a two bedroom unit and who has, incidentally, a far wider choice than a large company wanting to buy two or more hectares.
From my way of thinking, economic cycles come and go. Industries open and close, even public transport has gone through cycles of popularity. A general constant is education, health care, recreational facilities and general access to work. Yes, some people can and do work from home, but I would observe that even that has had it’s fifteen minutes of fame for the general population.
Areas which have shown growth against the trend are often areas which did not have the housing volumes before ie broadacres undergoing subdivision and new housing estates. These median figures do not actually mean anything as the existing properties have not increased in value, although the median of all sales in that area has.
Kero there is often a wave of change rather than a ball of fire. Look along major roads and see what is happening – standard three bedroom houses become medical centres or nail technician clinics or accountant’s offices or whatever – this does not necessarily increase the capital value of the property but would certainly increase it’s rental return and prolongs the life of the existing buildings until the next redevelopment of the site, which is often residential - medium or high density housing. That is then deemed to be highest or best use and if sold to multiple owners then that’s usually the final exploitation of the potential of the site.
By all means look and see where development is planned, and where the big kids (public high profile companies) are buying. Retail centres are obvious but there is more to economic health than supermarkets and hardware warehouses. Look for the real infrastructure – the growth in community or ‘common wealth’ as once established that rarely changes. If I was applying such criteria as a measure of the investment potential of an area, I would be more inclined to look for public transport and roads, education and health, and investment in community facilities such as parks, gardens and conservation of natural features which also incudes arable land, wetlands, ridge lines etc
If you get the mix right, you may have the ‘luck’ to choose the next Toorak, and although every dog has it’s day the gentrification of suburbs with no particular reason for existence except some aberration of planning from fifty years ago takes a very long time.
It still all comes down to the land. No, a big block in a restricted zoning is just a big block, of no particular benefit. Perhaps I should say ‘it all comes down to the position’ but that’s where the skill comes in.
Good luck
Kristine
The principle is sound, but not reliant on any particular branding to be effective.
When I set up my first retail business in 1994 it was in a pedestrian arcade off a main street. This had very limited visibility but somehow the business became established and was even starting to develop some standing in the community despite being almost hidden. The rest of the main street traders complained that business was very bad because of the pokies / the extension of the nearby shopping complex / because it was Tuesday.
After two years I moved the business out on to the main street, and in that time I had already noticed a significant change in spending patterns. The mobile phone was draining away discretionary spending. The $20 which would have been spent in my shop was being spent on phone calls, and you can’t spend it twice!
In the twelve years since I have been involved with this shopping strip of 108 shops, I have seen the strip shopping centres come in from the cold. This has been largely due to State Government initiatives such as the ‘Street Life!’ programs, special rates levies for advertising and management programs and other such incentives. Once again, the small specialist shops are providing what the shopping malls can’t do: direct parking, small ranges of stock (something different), and a feeling of being part of a local community.
In that twelve years we have seen the Mother of all booms and the aftermath of a gentle landing. In the area around one of the oldest shopping strips in Melbourne (Croydon) property values have risen along with the rest of the state despite no clearly identifiable ‘lead tenant’ in the strip and nothing remarkable about median family incomes.
A healthy economic community has certain parameters, some of which are the presence of the four major banks, public transport (hopefully train and bus although busses alone will do), a post office, and at least one other government or para-government facility such as a council service centre, library, medicare office, tab agency etc.
Stores requiring large land holdings are often positioned because of site visibility, and the ability to buy the land cheaply ahead of other local development. As with all businesses, the big kids are still taking a punt that their locality will be the right one. But if not, they will just move along until they find the place where they will see the most growth.
If Ikea or Wesfarmers have to cut their losses or adapt to changing demographics, that is really somewhat different to a small investor wanting to buy a two bedroom unit and who has, incidentally, a far wider choice than a large company wanting to buy two or more hectares.
From my way of thinking, economic cycles come and go. Industries open and close, even public transport has gone through cycles of popularity. A general constant is education, health care, recreational facilities and general access to work. Yes, some people can and do work from home, but I would observe that even that has had it’s fifteen minutes of fame for the general population.
Areas which have shown growth against the trend are often areas which did not have the housing volumes before ie broadacres undergoing subdivision and new housing estates. These median figures do not actually mean anything as the existing properties have not increased in value, although the median of all sales in that area has.
Kero there is often a wave of change rather than a ball of fire. Look along major roads and see what is happening – standard three bedroom houses become medical centres or nail technician clinics or accountant’s offices or whatever – this does not necessarily increase the capital value of the property but would certainly increase it’s rental return and prolongs the life of the existing buildings until the next redevelopment of the site, which is often residential - medium or high density housing. That is then deemed to be highest or best use and if sold to multiple owners then that’s usually the final exploitation of the potential of the site.
By all means look and see where development is planned, and where the big kids (public high profile companies) are buying. Retail centres are obvious but there is more to economic health than supermarkets and hardware warehouses. Look for the real infrastructure – the growth in community or ‘common wealth’ as once established that rarely changes. If I was applying such criteria as a measure of the investment potential of an area, I would be more inclined to look for public transport and roads, education and health, and investment in community facilities such as parks, gardens and conservation of natural features which also incudes arable land, wetlands, ridge lines etc
If you get the mix right, you may have the ‘luck’ to choose the next Toorak, and although every dog has it’s day the gentrification of suburbs with no particular reason for existence except some aberration of planning from fifty years ago takes a very long time.
It still all comes down to the land. No, a big block in a restricted zoning is just a big block, of no particular benefit. Perhaps I should say ‘it all comes down to the position’ but that’s where the skill comes in.
Good luck
Kristine
Do you still have the Nedlands House Dazz or has it been offloaded for higher yielding stock?
I ask as I recently saw this on rs.realestate.com.au and recalled you were talking off offloading it
Maybe it's more to do with there not being a hole in the ground anymore!
I find traction in the Bunnings principle, or major chains in regional, but not every time there is a Mc Donalds in a suburb....
That is exactly right. It is merely one tool in a comprehensive tool kit.
Read & heard from somewhere that the suburbs that has any of the two mega players are good signs that the suburbs will do well... has anyone heard something similar & know investors that have followed such a principle? not sure why coles is not included.
In my experience it devalues property. Mcdonalds brings riff raff and drunks walking the streets, dropping their food packaging every-where, noise and minor propeerty damage. Woolworths and bunnings bring traffic, traffic lights congestion and much longer commuting time. I have found it harder to get good tennants when a Mcdonalds open up near by and to maintain rental fees.
I would think that Woolworths is a much stronger indicator of population growth than a Bunnings.
I suspect that Woolworths work on a much smaller catchment area than Bunnings. Bigger single purchases at a Bunnings so customers are prepared to travel further.
I also think that McDonalds have lost the plot and are ready to plonk their stores anywhere and have even tailored their outlets to allow for a scaled down model. As already mentioned the stores certainly don't attract the best clientele.
Cheers
I thought Bunnings sold the entire toolkit?
The Y-man
Oh Y-man!
handyandy:
Pretty sure the Bunning metric was used as in their planning they look at factors such as future CG triggering renovations in turn rolling more + development to sustain their market.
Our local woolies is just finishing up a big expansion. Hopefully that bodes well!
They did. But it turned out that you could buy it cheaper somewhere else.I thought Bunnings sold the entire toolkit?
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