Could mixed-use retail real estate be your next property investment?
The residential property boom is over: sales have slowed and prices are likely to drop up to 10%. So could mixed-use real estate be a smart investment?
The residential property boom is over, with sales slowing and prices likely to drop as much as 10% this year, then stagnate for the next three or four years. The retail high street is in decline; rents are falling and there is a dearth of new apartment blocks with ground-floor retail space, while warehousing space continues to be in high demand.
So, is it time to get out of property? Well, it’s never that clear cut.
Early experiences always shape your perceptions throughout later life. For two years in the 1980s, I lived above a pharmacy on a high street roundabout. It was my first experience with mixed-use real estate living and I loved it.
Picture this: from a wide, clean sidewalk you enter through a double glass and wooden door in a recessed entrance hall. Ahead are wide carpeted stairs up to the first floor; high ceilings, a spacious landing lead to the lounge, dining room and kitchen, all with full height windows. Wide carpeted stairs lead up to the three large bedrooms and huge bathroom on the second floor, again with floor-to-ceiling windows.
Purpose-built in the 1950s, this had been the home of the original pharmacist. He and his family most likely lived above the shop while he worked downstairs. The family’s carbon footprint comprised only the Sunday drive out to the moors and the delivery of pharmacy products. I’m imagining that the kids walked to school and played bygone games like cards and marbles; they had grazed knees and always ate their greens.
In 2018, mixed-use real estate that I’ve seen in our capital cities come in two types.
The first is the rejuvenation of suburban (less likely CBD now) above-shop-residences where the owner has their own clothing store, coffee shop, art gallery or live event space. It could be a barber shop or tattoo parlour combination, or a small boutique hotel/restaurant — many are multi-retail. These home-shop hybrids all have one thing in common: the owner requires a living space as well as a retail space — combined they create the perfect mixed-use real estate solution. They aren’t cheap, but the business rents space from the owner, helping to pay the mortgage. It’s not unusual to see these change hands for $1.5 million if they have parking on site.
The second common type of mixed-use real estate is the brand new two-storey homes, often built on a secondary main road, with part of the downstairs utilised as a dentist, accountant, architect or doctor’s office. When I was a kid often the grandest and best built home in any suburb or small town was the ‘doctor’s house’. It was a large family home for a large family (why did doctors have so many kids?) as well as a surgery that employed three or four local people.
Other new mixed-use real estate builds are often hair salons and restaurants. One of my favourite ‘live above the shop’ businesses is Mike’s Steakhouse on the Gold Coast. Without exception, all of these business premises are well presented and cared for, in marked contrast to many poorly presented and rented high street businesses.
I wrote this not with sepia-tinted memories of my early 20s, but because self-investment in your own mixed-use real estate is a very clever way to manage costs, present your business the way you want to, grow your wealth and put a roof over your head.
My next property investment is likely to be a home-shop hybrid. I may even move in and sell handmade paddles and custom motorcycle parts with a café-bar in the centre. Now I’ll just need to grow a beard.
