The local retail market is emerging from the economic downturn in good shape.
PERTH’S retail property market is set for a revival on the back of an improved economic outlook, boosted by Western Australia’s growing resources sector and opportunities provided by a raft of new shopping centre developments, particularly in the CBD.
Industry analysts say confidence is high in the sector, after nearly 100,000 square metres of new retail space was added to the market in the past year.
And there is further retail growth on the horizon. According to the Property Council of Australia, over the five years to 2012, there will be 39 new retail property developments or major centre refurbishments completed.
This will add more than 263,000sqm of gross lettable area to the Perth retail market, an increase of 10 per cent.
Of this new space, 41 per cent is planned for the northern suburbs, 32 per cent south of the river, 16 per cent in the CBD and 11 per cent in the eastern suburbs.
CBD focus
Lease Equity managing director Jim Tsagalis told WA Business News the added retail space in the CBD – including the recently completed enex100 and the Wesley Quarter, plus the upcoming completions of one40william and Raine Square – combined with the myriad office developments coming on line, had changed the retail landscape indelibly.
“What that means is there is a massively greater working population,” Mr Tsagalis said.
“If I could put it in suburban terms, there are 30,000 extra people that are going to be working in the CBD by 2010. That’s an explosion by residential development terms.”
While Mr Tsagalis said the economic climate of the past 12 months had put a slight pause on new developments, the performance of the sector had been sound when compared to other states.
“Clearly with how the banks have been acting in relation to the sort of equity they want in deals and what have you, the landscape’s changed, so it’s not as easy to do a deal at the moment,” he said.
“The best way to put it in Perth terms is there has been a pause, a breath’s been taken, that’s my interpretation of what’s happened, as opposed to what’s happened in other parts of the world and indeed Australia, where there’s just been a handbrake applied.”
Economic strength
Retail leasing agents Savills WA head of research, Helen Swanson, said the retail market was beginning to reflect the strength in WA’s resources sector.
The latest Savills research shows rents in the Hay Street Mall currently ranged from $2,000/sqm to $4,500/sqm in the September 2009 quarter, with rental rates rising more than 40 per cent during the past four years.
Ms Swanson said an overall vacancy rate of 7.75 per cent was recorded in the Perth CBD in September, a decrease from the 8.77 per cent vacancy rate registered in April.
The largest fall was in the CBD malls, where the vacancy rate fell from 10.3 per cent in April to 2.9 per cent in September.
“We’re starting to see an emergence back into the market, we’re seeing key clients looking at retail space in the CBD, in the malls, in good accessible areas with good market exposure,” Ms Swanson said.
“Not only that, a key feature is that Perth is now ranked third on a national level on the number of top 300 ASX companies, which is quite staggering (that) given Perth’s location and its isolation, people are choosing to have their headquarters here.
“People always say that WA is a volatile market; it might be a volatile market but it’s a leader in the market at the moment over all other states. WA looks well positioned for the future.”
City of Perth Lord Mayor Lisa Scaffidi echoed the sentiment that the retail sector in WA was reflecting the state’s economic strength.
“My understanding from those I speak to is that (major international brands) really are starting to appreciate Perth’s significance in the Asia-Pacific region,” Ms Scaffidi said.
“They’ve obviously been observing the incredible growth, both in population terms and in business terms here, and from a cost perspective they realise now is as good a time as any to gain a presence in the city.
“With the redevelopment that is occurring in the city there are many very competitive opportunities to find that perfect placement within the central city landscape.”
High-end emergence
Savills national head of retail services, Chris Ireland, said the biggest impact on WA retail during the past 12 months was the emergence of high-end luxury brands in the CBD.
Mr Ireland said the opening of the Wesley Quarter, on William Street, and the continued strength of King Street as a high-end shopping precinct was creating opportunities for other luxury brands.
“The international brands are seeing Hay Street as a great opportunity off the back of Armani and Burberry,” Mr Ireland said.
“We’ve got the opportunity now with Hay Street to leverage off King Street. So that’s where Perth is an opportunity for a lot of the brands, between King Street and William Street.
“They’re not going to go into the malls because you’ve got your general retail categories in the malls, but there are a number of brands that I’m talking to that are interested in that area between King Street and William Street.”
Mirvac WA chief executive Evan Campbell, whose company developed the Wesley Quarter, said he also expected further significant growth on Hay Street between King and William.
“The area surrounding the new William Street railway is undergoing the most growth,” he said.
“Wesley Quarter has begun the transition of linking this area to the upmarket and popular King Street precinct.
“Once the 140 William Street and Raine Square developments are complete, it will add significant critical mass and choice to retail in the Perth CBD.”
In the suburbs
For suburban shopping centres, Mr Tsagalis said future growth was likely to occur north of the river, after years of sustained development in the southern corridor.
“For the last five years we’ve probably seen an absolute focus in terms of outcome on the southern corridor,” he said.
“For the next five years I think there is going to be a real rebalancing into the north with the road system and infrastructure that’s being put in there.
“Ten years ago we were saying there was only the north, and the south was the poor relation.
‘‘Well, that’s well and truly swung, and I think it will swing a little bit again in relative terms, even though I do believe that the south is still going to be a very desirable place to live, and therefore build and grow shopping centres.”
Mr Campbell said the emergence of the city as a luxury destination would not have a large effect on suburban shopping centres, as the suburban shops tended to be needs-based retail.
“Suburban centres and strip malls will remain an important part of their community, but precincts like Wesley Quarter and King Street offer more of an upmarket shopping experience,” he said
“It is high-end, sophisticated, and perfectly located to capitalise on the inner-city shopping market and tourism, which is an ever expanding market in Western Australia.”
Future growth
Ms Scaffidi said WA retail would be further boosted in coming years by key state government projects, such as the Northbridge Link and the much-debated development of the Perth waterfront.
“We’re going to see Northbridge Link land becoming available once the rail line is sunk, and hopefully by then we’ll have an announcement that the waterfront area is proceeding, then there is also the riverside project,” Ms Scaffidi said.
“I believe there’s going to be a continual rolling out of available development opportunities.
‘‘And given the fact that we’re going to see an increase in the economic cycle again thanks to the Gorgon project and other key resource projects, I do believe that Perth can confidently look forward to the next five to 10 years at least of fairly robust activity.”
