By Aimee Chanthadavong
Sydney’s bulky goods market, which is referred to the segment that sells items such as furniture, whitegoods and electrical equipment, is set to gain momentum in 2011 underpinned by the strong housing marketing in NSW, according to research by CB Richard Ellis (CBRE).
Bulky goods director Alistair Palmer said the positive NSW housing market will eventually deliver relief for the bulky good sector after five years of negative growth in NSW.
“Housing starts in NSW increased 26.4 per cent in 2010 and Access Economics forecast an average annual increase of 8.7 per cent between 2011 and 2015,” he said.
"In addition, the results of the upcoming state election could see the improved delivery of much needed infrastructure investment in NSW, which would also have a positive flow on effect for Sydney’s bulky goods sector.”
Bulky goods retailing is closely linked to growth in the housing market, as many retailers in the sector sell product for the home.
As more new homes are built, they would require to be furnished, which will then see more consumers buying from the bulky goods market at stores such as Snooze, Bunnings and Beacon Lighting.
CBRE’s bulky goods senior negotiator Shane Cook said while it was too early in the year to call a complete rebound in the sector, there were signs of improving fundamentals.
“Within the first few months of 2011, there has been a significant uptake of existing stock,” he said.
“A prime example is the Home Focus Bankstown centre which was bought during the GFC by a private investor. The centre had a poor lease expiry profile and multiple vacancies, however, in early 2011, four lease deals and a number of lease renewals resulted in an almost fully leased centre, indicating solid demand for existing premises.”
Palmer noted that there had been limited supply in the Sydney bulky goods sector for the past two years despite increasing demand.
“Despite retailer demand, only three major bulky goods projects were completed in 2010 as projects were put on hold during the economic downturn, due to difficulties in obtaining development finance ” he said.
“We expect developers to continue having difficulty obtaining finance for new projects in the coming 12 months, however a strong supply of format superstores being directly funded off balance sheet, such as the new stores for Bunnings, Woolworths and IKEA, will come through. “
CBRE said over the next three years 17 major projects are forecast with big box retailers set to drive a majority of these developments. It is expected to bring greater competition to the market.