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A snapshot into Western Australia’s retail pipeline indicates a looming undersupply of properties fit for purpose.
According to CBRE, 43,000 square metres of new retail space will be delivered in Perth in the next three years, which is less than half the 10-year average.
Historically, the state capital has produced approximately 116,000 square metres of new supply over a three-year period.
The firm indicated that if this projection remains accurate, occupiers will find themselves with limited options, while pressure on rents will likely see prices rise swiftly.
Cameron Douglas-Perrine, research analyst at CBRE, commented that this shortage will particularly impact the top end of the market.
“Occupiers seeking out high-quality new supply will have limited options over the next few years. We expect this to have a positive impact on rental growth in the medium term as landlords gain bargaining power in the undersupplied market,” he said.
The situation is also likely to be impacted by strong population growth of at least 13 per cent over the next decade, driven by both international and domestic migration to the state. Retail demand is projected to track upwards accordingly.
Mr Douglas-Perrine commended that strength in the mining sector and labour market is supporting higher economic growth than in many other Australian states, adding further demand to the retail sector.
Current investors will benefit from the tightening of supply. At the moment, the state’s shopping centres are largely held by institutional investors, with large entities accounting for 64 per cent of deal activity in the past three-and-a-half years.
Private owners make roughly a third (32 per cent) of transactions, with family offices and trusts accounting for the remainder.
The CBD is the most tightly held area, with only one asset in Perth’s central district traded over the period.
Neighbourhood shopping centres have been the most actively traded, followed by subregional shopping centres.
According to CBRE’s national director of retail capital markets, James Douglas, institutional investors hold an even larger share of the state’s assets when considered on the basis of size alone.
“This institutional ownership is even more concentrated on a square-metre basis, with REITs, superannuation funds and investment management firms controlling 1.8m square metres of shopping centre stock, or approximately 80 per cent of the market,” Mr Douglas said.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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