Just 43,000 square metres of new retail space will be delivered in Perth between now and 2026, according to a new report by CBRE.
This is less than half the 10-year average and is expected to limit options for occupiers in the future and positively impact rental growth.
CBRE’s latest Western Australia Retail Market Overview highlighted a range of positive indicators for retail landlords, including the lack of new development, given the historical average is 116,000 square metres of new supply over a three-year period.
Western Australia’s retail market is also expected to benefit from strong population growth of 13% over the next decade, driven by both international and interstate migration, which will increase retail demand in both the short and long term.
CBRE research analyst Cameron Douglas-Perrine said higher economic growth relative to other major Australian states, underpinned by the strength of both the mining sector and the labour market, would also support retail demand.
“Occupiers seeking out high-quality new supply will have limited options over the next few years,” Douglas-Perrine said.
“We expect this to have a positive impact on rental growth in the medium term as landlords gain bargaining power in the under-supplied market.”
From an investment perspective, the report highlights that institutions have been the most active purchasers of shopping centres in Western Australia, accounting for 64% of deal activity in the past three and a half years.
Neighbourhood shopping centres have been the most actively traded, followed by sub-regional shopping centres, with only one CBD asset traded.
“Institutions continue to dominate the market, owning 63% of the state’s shopping centres, compared to private owners (32%) and family office/trusts (5%),” CBRE retail capital markets national director James Douglas said.
“This institutional ownership is even more concentrated on a square-metre basis, with REITs (real estate investment trusts), superannuation funds and investment management firms controlling 1.8m square metres of shopping centre stock, or approximately 80% of the market.”