Developers are increasingly coupling major residential development with complementary retail development, rather than selling the retail component, as a way of diversifying their interests and capitalising on their investment.
Perth has the strongest retail turnover growth in the country, and developer involvement in shopping centres shows a strong level of confidence in both the retail and residential markets.
It is little surprise that areas with the highest building approvals also have a correlating amount of new retail development, but the sheer strength of the suburban retail sector is catching the eye of savvy investors.
New housing developments and ‘urban renewal’ initiatives in the north, east and southern growth corridors have triggered a series of new retail projects.
Lease Equity director Jim Tsagalis told WA Business News the market was very strong across the board.
“The market seems to be very strong for suburban retail, and judging by the number of projects coming out of the ground all over Perth, there has to be a lot of growth going forward,” Mr Tsagalis said.
“A lot of proposed retail is linked in some way to people who are doing the residential development – they know a lot is being sold and that a retail facility is needed – the confidence of people like that is indicative of the market.”
WA Business News reported late last year that listed property giant Stockland had filed a development approval to construct a $23 million shopping centre in Baldivis with the intention of increasing its retail presence in Western Australia.
The retail development is adjacent to Stockland’s $226 million Settlers Hills residential development, which is expected to be home to 6,000 residents in more than 2,100 residences.
Perth’s biggest private developer, Nigel Satterley, is also building retail developments in his Secret Harbour and Brighton developments.
Armadale’s population is forecast to increase from 55,000 to 85,000 over the next 10 years and upgrades are under way to two Armadale shopping centres, totalling $115 million, alongside the revitalisation projects being undertaken by the Armadale Redevelopment Authority.
Mr Tsaglais said many in the industry were questioning the relevance of neighbourhood shopping centres as recently as eight years ago, arguing that they couldn’t compete with big centres.
“Well-run local centres do very well with their local catchments, and they have moved away from a fashion base to a food base – they are just more convenient for residents,” he said.
Savills Research shows yields for neighbourhood shopping centres were an average of 8 per cent last year.
Savills WA managing director Paul Craig said there were a significant number of developments occurring in Perth and around the state.
“Western Australia is the strongest performing state in regards to retail turnover growth,” he said.
“State turnover increased by 6 per cent in the year to September 2005 – higher than the long-term average of 5.4 per cent and a great deal higher than the national turnover, which was at 2.5 per cent for the same period.”
And there also was increased interest in the regional centres.
“Retail turnover in the year to June 2005 was 4 per cent in the South West region, down somewhat from 9.3 per cent realised the previous year, but still significantly higher than the national average,” Mr Craig said.