Perth’s retail property sector is heading into a new era of extended trading hours, expanded centres and more sophisticated retail offerings.
LONG regarded as the poor cousin to its eastern states counterpart, the Western Australian retail property sector is taking the first steps in playing catch-up.
Several new developments in the CBD have helped Perth become an attractive destination for high-end brands, with international fashion icons Prada and Hugo Boss, and new-technology leader Apple Computers taking up residence in the now-trendy western end of the CBD.
According to Property Council of Australia senior policy adviser, Lino Iacomella, the CBD is in the midst of a development renaissance that has not been seen for decades.
“There is a huge excitement factor now in the Perth CBD, centred on the new built form and new buildings,” Mr Iacomella said.
“But not only that, important infrastructure is also starting to really show its true benefit, and that includes the railway investments, as well as the regulatory changes, even from small things like freeing up liquor licensing rules around small bars and activating laneways.
“Cementing all of that of course are the major projects that are now impacting the entire CBD, including the Northbridge Link, the Waterfront, the Treasury Building hotel, EPRA’s gateway project and the CBD enhancements by the city of Perth, and the private building projects like City Square, Raine Square, and one40william
“All of that packaged up is essentially a new Perth. We’re seeing a new Perth emerge out of that, which is really exciting, for the people who work in the city and visit here, but most importantly, it will become much more productive and generate a lot more economic output for the state.”
The HASSELL-designed and Probuild-built one40william is a good example of the new built form, with its bold lines sweeping across the Murray Street Mall.
Situated at the corner of Murray and William Street, and straddling the Perth underground station, one40william has 6,500 square metres of retail space, and will combine with 13,000sqm of retail space at the under construction Raine Square to create a major new retail hub at the north-western edge of the CBD.
Down on St Georges Terrace, the City Square development will provide 4,300sqm of retail space, further changing the dynamic of the CBD’s retail offering.
Colliers International retail leasing associate director Peter Millard, who handles leasing for one40william, said the new developments meant the CBD was becoming a dominant force on Perth’s retail landscape.
“Customers are coming back to the city, because there are no hoardings up like there were before,” Mr Millard said.
“Most of the hoardings have been removed, apart from Raine Square, and despite the fact that William Street has been closed up to do tunnelling work, it’s clearer, it’s easier to get around the city now and people are starting to appreciate what the combined effect is of those additional retailers.
“Where people used to avoid the CBD a couple years ago, and go to their suburban shopping centres like Karrinyup or Garden City, there’s more to be had in the city now.”
DORIC business development manager Keith Somers, who oversaw construction of the Wesley Quarter, said he had noticed a shift in the market to a higher-end retail offering.
“When we did the Wesley Quarter, part of their retail strategy was to attract high-end retailers,” Mr Somers said.
“I see that the market is opening up. The Western Australian demographic is becoming more sophisticated.
“Consumers are more widely travelled and more sophisticated in their tastes, both their culinary tastes and also the way that they clothe themselves.”
Strzelecki Group principal Greg Poland said the new market characteristics had resulted in increased interest for retail tenancies at the group’s Sorrento Quay and Mandurah Dolphin Marina developments, and had also prompted a shift away from the retail franchise model.
“Leasing is on the up, people are starting new businesses, but we’re not finding franchises, we’re finding owner-operators,” Mr Poland said.
“The main reason for that is that franchises are having problems raising money.
“When people want to get a franchise, people are finding it hard to justify the costs, and of course then they lose five or eight per cent of their turnover.”
According to Mr Poland, this market shift, and the consumer shift of wanting a more sophisticated product, has given smaller shopping centre developers and independent retailers an opportunity to break the mould, and provide unique offerings within new and expanded centres.
“The opportunity now is to get out of Coles’ and Woolworths’ grasp,” he said.
“If you look at things like the Boatshed in Cottesloe, and look at Herdsman Growers Market, they are packed because they have the ability to deliver better quality, better prices and better service.
“I think shopping centre developers, if they are a multi-national, they can’t deliver that.
“But if they’re a small operator, that owns two or three centres, they can deliver a different style centre which is more gourmet food-oriented, more owner operator and more friendly.
“There is a certain part of the population that wants shopping to be an experience, and they want fresh product that hasn’t been stored for two weeks in a cold store.
“There is a gap in the market for developers and mainly smaller shopping centre owners to find a niche and promote a shopping experience rather than being a clone walking into Coles.”
The retail revolution is not just confined to the CBD, according to DORIC’s Keith Somers.
DORIC is currently constructing the Waterford Plaza, and over the past 12 months has delivered the Rockingham City and Lakeside Joondalup shopping centres.
Mr Somers said the continued strong population growth in WA was fuelling retail property investment in suburban locations.
“The growth areas for retail property follow new houses,” he said.
“It’s where you’ve got residential growth around; people in those newer areas of residential growth who have got young families spend more on retail.
“It really goes where there is economic prosperity, you’re looking at a situation where you’ve got people employed and they’ve got the disposable income, they will generally spend it.”
Despite GFC credit restrictions still lingering over the property sector, Mr Somers said retail property remained attractive to financiers.
“Retail is one of those areas that are attractive because of the high cash flow you get in retail property investment,” he said.
“We anticipate that there will be a stronger attraction there from financiers and the financial sector to have an exposure.”
Colliers International’s Peter Millard said continued economic growth in WA meant retail property, suburban shopping centres in particular, was becoming increasingly attractive for listed and non-listed property trusts alike.
“The listed property trusts have done their big transactions,” he said.
“GPT sold out of Floreat, ING sold out of Lakeside Joondalup, Armadale and Harbour Town, and that’s allowed Lend Lease to come back into the market. But what you’re now getting is that lower-tier activity going on, like the likes of Southern River Shopping Centre which sold recently, which went from a Queensland company to a Perth-based syndicate.
“There are some good opportunities there for non-listed property trusts, the syndicates, to grab assets they can build on for the next five to 10 years.
“Most of the interest is from high-net worth investors who are Perth based, but certainly there is offshore money coming in also.”
While early this week the shackles were finally lifted on weeknight trading, it is the state government’s new activity centres policy that has the potential to transform the retail sector.
In releasing the policy, Planning Minister John Day suggested the reforms would create more diversity around centres, as development outcomes would not be solely focused on a centre’s retail components.
“Centres are actually moving into a different phase,” Mr Somers said.
“The fundamentals of retail shopping centres are still the same; you need good pre-leasing and pre-commitments to get a development up.
“But it’s moved away from being a pure retail shopping experience, to more a place to meet, so it has come full circle back into the traditional marketplace, traditional meeting place/town square.
“You can see that with some of the more innovative designs architects are putting together. It’s come to the point where you not only have your retail component, but you’ve got entertainment, you’ve got public open space, and you’ve got interaction with public facilities such as libraries.”
One of the key reforms of the activity centres policy is the provision of a range of housing options around retail centres.
Mr Iacomella said he expected a diversity of medium- to high-density housing products would be combined with the redevelopment or expansion of a shopping centre.
“There are examples of that already, like the Claremont Quarter, where there are apartments on top of the centre,” he said. “That’s the ultimate, but more likely it will be a combination of that and also on the periphery within 500 to 800 metres of the centre.
“The challenge will be integrating that diverse housing as well as enabling the zoning to happen.
“The property industry is looking at local government to support the policy by enabling appropriate density zoning to allow housing diversity around centres.”
Mr Iacomella said the provision of housing within the activity centres would bring opportunities for corporate and private investors.
“We will see new housing markets for property investors,” he said.
“Most residential property investors are private individuals, so that’s a beneficial outcome from a property investment perspective.”