Perth’s retail supply pipeline remains soft

Over 20,000sqm of projects are expected to be completed by mid-2023.

According to a JLL report, only one significant retail completion (≥1,000 sqm), totalling 14,000 sqm, was recorded in Perth during 1Q23. 

Over the last 12 months, completions totalled 49,300 sqm, below the 10-year average of 80,700 sqm. There is a further 21,300 sqm of projects currently under construction and due to complete by mid-2023.

Here’s more from JLL:

In addition to projects already under construction, there are seven projects with plans approved totalling 89,400 sqm and four projects on hold totalling 111,300 sqm. However, rising construction costs, ongoing labour shortages and broader softening in global economic conditions may pose hurdles for new project commencements.

Despite the overall CBD retail vacancy rate increasing by 0.1 percentage points (ppts) to 20.7% in 2H22, foot-traffic has improved significantly. The latest Property Council of Australia (PCA) office occupancy survey revealed that office occupancy in Perth CBD reached 80.0% of pre-COVID-19 levels, the strongest of all Australian capital cities.

Mild increase in rents across most sub-sectors

Average rents recorded marginal increases across most sub-sectors during 1Q23. Modest rental growth has been evident across most sub-sectors over the last 12 months, after declining over the two-year period up to 2022.

Investment volumes strengthened over 1Q23, totalling AUD 331.2 million across five transactions. Annual investment volumes totalled AUD 776.0 million, above the 10-year average of AUD 621.5 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.