Perth retail completions still well below the 10-year average of 77,400sqm | Real Estate Asia

Perth retail completions still well below the 10-year average of 77,400sqm

Completions only totalled 20,700sqm over the last 12 months.

Perth recorded only one significant completion (≥1,000 sqm) during 3Q22, which was Primewest Ellenbrook (7,216 sqm). 

According to JLL, over the last 12 months, completions totalled 20,700 sqm, below the 10-year average of 77,400 sqm. There is a further 42,100 sqm of projects currently under construction and due to complete by mid-2023.

Here’s more from JLL:

There is a strong supply pipeline beyond projects already underway. A further six projects have plans approved, totalling 60,500 sqm. There are four projects on hold with development approval (111,300 sqm), awaiting significant improvement in retail conditions before proceeding.

WA retail turnover growth remains elevated

WA retail spending recorded growth of 8.3% y-o-y in August 2022 versus 6.6% in May 2022, indicating an increase in spending from three months prior. Spending at cafes, restaurants and takeaway recorded the strongest performance of all categories, with growth of 15.4% y-o-y in August 2022, while clothing, footwear and accessories spending was the second strongest performer (up 14.9% y-o-y).

Anecdotal evidence suggested that foot traffic had increased but remained below pre-COVID-19 levels, particularly for CBD assets. Growing workplace flexibility for employees, such as the trend of working from home, continues to place pressure on vacancy and rental growth prospects.

Mild increase in rents across all sub-sectors

Average rents recorded marginal increases across all sub-sectors during 3Q22. Despite the quarterly increase, CBD rents have generally trended lower since 2018 as tough market conditions persist, and landlords attempt to combat elevated vacancy levels.

Investment volumes strengthened over 3Q22, totalling AUD 105.5 million across two transactions. In the largest sale over the quarter, Forest Lakes Shopping Centre (in the neighbourhood sub-sector) sold for AUD 71.5 million.

Outlook: Retail spending growth expected to moderate

The current high inflationary environment and expectations of further increases in the cash rate may lead to a moderation in retail spending patterns moving forward.

Investment demand is expected to be attracted towards the defensive nature of supermarket-anchored neighbourhood centres, while sub-regional and regional centres may draw counter-cyclical investors.

Note: Perth Retail refers to Perth's overall retail market.

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