Perth retail completions underperform the 10-year average

Completions reached 42,000sqm over the last 12 months.

No significant completions (≥1,000 sqm) were recorded during the second quarter in Perth. According to data from JLL, over the last 12 months, completions totalled 42,000 sqm, below the 10-year average of 78,000 sqm. 

There is a further 21,300 sqm of projects currently under construction and due to complete by the next quarter.

Here’s more from JLL:

In addition to projects already under construction, there are eight projects with plans approved totalling 194,400 sqm and three projects on hold totalling 59,300 sqm. However, elevated construction costs, ongoing labour shortages and broader softening in global economic conditions may pose hurdles for new project commencements.

WA retail turnover growth remains elevated despite moderating

WA retail spending recorded growth of 7.6% y-o-y in May 2023 versus 8.2% in February 2023, indicating a moderation in spending from three months prior. Spending at cafes, restaurants and takeaway recorded the strongest performance of all categories, with growth of 12.1% y-o-y in May 2023, while other retail spending was the second strongest performer, up 11.5 % y-o-y.

The overall CBD retail vacancy rate decreased by 0.6 percentage points (ppts) to 20.1% in the first half of 2023, with foot traffic improving significantly. The latest Property Council of Australia (PCA) office occupancy survey revealed that office occupancy in Perth CBD reached 81.0% 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 the quarter. Modest rental growth has been evident across most sub-sectors over the last 18 months, after declining over the two-year period up to 2022.

Investment volumes weakened over the quarter, totalling AUD 16.0 million across one major transaction. Nevertheless, annual investment volumes totalled AUD 622.0 million, above the 10-year average of AUD 579.5 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.