I recently visited Perth to meet clients, prospective clients, agents and to see some centre openings and extensions. There are plenty!
There is no doubt that Perth is showing signs of retail spend improvement after a very challenging period of flat or negative growth. This was the message from all of the many people with whom we discussed the market. Consumer confidence hit a 5 year high in the September quarter.
In fact, Deloitte Access Economics predicts WA will have the strongest retail sector of any State over the next five years.
Some of the key ‘take-outs’ from my visit include;
1. Reflecting the east coast, there seems to be higher investor demand for all asset classes other than sub-regionals
2. Consumer spending and confidence is still poor, but showing signs of improvement
3. The bottom end of the retail leasing market is firmer than the middle to upper – retailers are looking for deals and very cautious about big rents
4. Tightening lending policies have softened leasing demand
5. Project leasing is being driven hard by capital leasing incentives
6. Most major shopping centres are looking to food and beverage precincts to underpin expansion plans (same across the country).
7. Aldi are expanding in WA and are being courted by centre owners looking to repurpose space that may become vacant (i.e part sub-regional space). Or add to the centre’s overall appeal, visitation, spend.
8. Owners are looking at other ‘non-retail’ usages to either repurpose poorly performing space or ‘bolt on’ to centres if land is available. Gyms, fitness, medical, childcare – as examples.
Vacancy remains an issue in the suburbs across all asset types. In an increasingly competitive market, centres which have not adapted to compete are showing signs of distress and many will need investment and smart leasing strategies to survive in to the future.
I visited Westfield Carousel on the redevelopment opening day and I must say…wow! The outdoor casual dining opposite the new Hoyts foyer is seriously impressive. Of course it was super busy on opening day but the design, location, ambience and quality of operators should ensure it’s a roaring success. There was plenty of hoarding downstairs in the new fashion wing outside David Jones – many with ‘Coming Soon’, including WA’s first Sephora store. The extend of the fashion precincts is a certainly a sign of the times…we understand even this powerhouse has struggled to secure fashion, with plenty more deals to do. I also visited the impressive Belmont Forum, a Perron asset, which has recently undergone a revamp with a new fresh food offer outside a bigger, new Coles.
Vacancy is still significant in the CBD. I noticed particularly high vacancy in the many arcades and thoroughfares, particularly the smaller shops. though Uniqlo’s recent opening was heralded as a big success and by all accounts they have started well. Hopefully this will be a ‘shot in the arm’ for the CBD, which has seen the first stage of Charter Hall’s Raine Square open, eventually offering 18,000 sqm of retail space including initially Palace Cinemas, Coles Central and Tim Ho Wan. There is a very big emphasis of casual dining in the mix with a number of new entrants to the WA retail market.
Located next to the airport, DFO Perth opened recently with well over 100 retailers, mainly fashion, lifestyle and accessories. We understand that it is trading well so far. The big question is, what will be the impact on other centres, particularly the centres still relying heavily on fashion spend? Time will tell. Reflecting the changing nature of factory outlet assets, DFO will also offer a significant food offer including QSR, cafes and even a Lindt Outlet store.
General Manager - Retail
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