Perth’s largest retail transaction since 2019 revealed
It was a deal worth nearly AUD500m.
Average retail rents in Perth recorded no changes across all sub-sectors during the quarter. Nevertheless, JLL said modest q-o-q rental growth has been evident across most sub-sectors over the last 18 months, after declining over the two-year period up to 2022.
According to a JLL report, investment volumes lifted significantly over the quarter, totalling AUD 617.2 million across five major transactions. In the largest sale of the quarter, Midland Gate Shopping Centre sold for AUD 465.0 million, with the sale representing the largest retail transaction in the Perth market since Q4 2019.
Here’s more from JLL:
WA retail spending recorded growth of 6.3% y-o-y in August 2023 versus 7.6% in May 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 10.3% y-o-y in August 2023, while other retail spending was the second strongest performer (up 9.7 % y-o-y).
The overall CBD retail vacancy rate decreased 0.6 percentage points (ppts) to 20.1% in the first half of 2023. Anecdotally, retail demand conditions have continued an upward trajectory in the quarter, with the CBD holding several key activation programmes, resulting in increasing visitation.
Confirmed supply pipeline remains soft
There were four completions (≥1,000 sqm) recorded during the quarter, totalling 25,300 sqm. Over the last 12 months, completions totalled 60,100 sqm, below the 10-year average of 61,400 sqm. Projects under construction total 10,000 sqm across just one major development.
In addition to projects already under construction, there are ten projects with plans approved totalling 211,200 sqm, and two projects on hold totalling 52,500 sqm. However, elevated construction costs, ongoing labour shortages and broader softening in global economic conditions may pose hurdles for new project commencements.
Outlook: Moderating retail spending growth on the horizon
Enclosed centres reliant on discretionary retailers may face challenges with elevated vacancy rates amid curbed consumer spending, due to higher interest rates.
Investment preference for defensive retail assets continues, with three out of the five transactions in the quarter being neighbourhood assets. This trend is expected to persist due to the non-discretionary appeal of these assets.
Note: Perth Retail refers to Perth's overall retail market.