Premium rents for premier positions

Retailers may be enjoying some of the strongest market conditions on record in Western Australia, but their landlords are making sure the good times are shared around.

Rents across all retail classes, including city centre malls, premier strip shopping areas, and the major regional centres, are understood to have climbed between 5 per cent and 7 per cent over the past year as a result of strong demand for space.

In the Perth CBD’s most visited shopping area, the Hay Street Mall, rents have risen to a range of between $2,500 per square metre and $4,000/sq m net, per month. On top of that, outgoings such as rates, management and repairs are between $150 and $400 a month, according to research by Jones Lang LaSalle.

Murray Street Mall rents are slightly cheaper, in the range of $2,200/sq m and $3,200/sq m per month, while King Street has risen to between $1,000/sq m and $1,700/sq m per month.

Jones Lang LaSalle research analyst Andrew Bouhlas said retail rents in Perth had not yet exceeded those of Brisbane, where super prime space was fetching an average of $5,500/sq m per month.

“There is still plenty of room for rental growth but Perth is not there yet. Sydney is averaging super prime rents of between $6,500/sq m and $7,000sq m, and Melbourne is between $5,500/sq m and $6,000/sq m,” he said.

Outside the CBD, Perth’s premier shopping strips of Bay View Terrace in Claremont, Rokeby Road in Subiaco, and Napoleon Street in Cottesloe are reportedly doing a roaring trade, and rents have followed suit.

Colliers International associate director retail leasing Richard Cash said rents in Claremont were picking up, due to the large-scale retail and residential developments in the area.

Mr Cash said he had just signed a deal with a tenant for $1,850/sq m net on Bayview Terrace, significantly higher than the $1,500/sq m that was until recently the average rent.

“Claremont just keeps getting better and the growth in rents that we’re seeing is spectacular. Rokeby Road in Subiaco by comparison is sub $1,000/sq m,” he said.

CB Richard Ellis property research analyst Michael Olsen said Bayview Terrace was the best performing retail strip in Perth and, as a result, rents were the highest of all strips in Perth at between $1,500/sq m and $1,950/sq m net per month.

Mr Olsen said suburban retail was still the best performing asset out of all property classes in WA, averaging 15.8 per cent returns, which was why the assets were tightly held.

“The yields in existing neighbourhood centres are down to between 6.25 per cent and 6.75 per cent, and regional centres are attracting yields of 5 per cent to 5.25 per cent. The yield compression is happening on a national scale because the market conditions are strong and retail assets are highly sought,” he said.

Perth’s bulky goods market, meanwhile, is powering ahead, with rents up 14.5 per cent between June 2006 and June 2007.

CB Richard Ellis reports that, as at the June quarter 2007, net face rents were at $205/sq m, an increase in the order of 14.5 per cent compared with the same period in 2006 when indicative net face rentals reached $179/sq m.

Net face rents now trend between $180sq m and $230/sq m.

Mr Olsen said the significant rental growth in the bulky goods market could be directly attributed to softening markets in the eastern states, soaring land values in industrial and commercial precincts in WA as well as rising construction costs which were forcing developments to command higher rents.

As a result, potential retailers were seeking larger tenancies with longer lease terms in order to avoid market reviews in the short to medium term.