Are homes over retail spaces worth the investment?

Once, it was a humble flat over a fish ‘n’ chippie.

Today, it’s more likely to be a lofty, multi-million-dollar tower of luxury apartments sitting on top of a major shopping centre.

Does investing in homes over retail spaces make good investment sense?

That depends, say the experts, on the quality of those stores, the demand for their goods and services, and their location.

Whether or not investors will get good returns from homes over retail depends on the location and type of retail below it. Photo: Vaida Savickaite

The centre of Sydney, for example, is about to be transformed by a $1 billion mixed-use development on the site of the historic Market Street David Jones store, with a 22-storey tower of 101 apartments, priced from $1.9 million to $30 million, above six levels of retail and offices.

“I think that project is all about where it is, on the David Jones site that’s known to so many and on the edge of Hyde Park,” says Peter Chittenden, managing director residential of Colliers, which is selling the homes.

“That’s what makes it so desirable for both owner-occupiers and investors.”

“The hotspots for buyers have been the eastern suburbs and regional high-net-worth individuals because everyone knows David Jones and the enjoyment of the story-telling around that has been very high.”

Another major $1 billion redevelopment is that of The Grand Residences at Eastlakes in the south: three towers with 490 apartments over 80 restaurants, cafes, shops and supermarkets. Prisca Edwards, director of sales at the developer, Crown Group, says their previous 2014 project of apartments over retail, Top Ryde, is still proving an excellent investment today.

“Everyone is very, very happy with that as there’s so much demand from everyone who loves the convenience and the security of living above a good shopping centre,” she says.

“I think investors like those developments too, as the shops are a big plus for the apartments, for every target market, and that’s already been tried and tested in so many Asian countries.”

Smaller projects can also work well.

Sofia Kariotis of the Nelson Alexander agency is currently selling an apartment in Melbourne’s Brunswick in a five-level block above ground-floor retail on Hope Street.

Although new large-scale developments see the most promise for investors, smaller units over cafes in the middle of townships can also yield high dividends. Photo: Vaida Savickaite

A big plus is the popular The Edible Cafe.

“With so many people now working from home, they really like being able to nip downstairs for coffee or lunch,” she says.

“That’s a big selling point for residents and investors. The best retail to live above, I think, would be a cafe, small supermarket, dry-cleaners and a fish ‘n’ chip shop.”

In Brisbane, Mark Courtney, the general manager Queensland of property advisers macroplan, also believes investors can come up trumps with apartments above retail, as long as the right demand drivers are there.

“It’s about the catchment in which the investment opportunity sits,” he says.

“There has to be demand for those shops, that they support the demographic of the area, and also, on the supply side, there’s plenty of footfall.”

“Sometimes, if the retail is unsuccessful, it’s a recipe for something to go wrong as no one wants to live above permanent For Lease signs. But at a time when so many are working from home, it can work very well.”

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