Retail conditions are currently experiencing a broad range of differing impacts. As cost-of-living pressures start to filter through to a pullback in retail spending in the Eastern states, consumer spending is holding up in WA, as confidence throughout the state remains much higher. 

WA has the highest retail spend per capita of $16,489 [CS1] compared to the East Coast and the national benchmark of circa $16,016 in the year to May 2023. Colliers Research data shows that the population increase expected in WA has the potential to add retail spending of roughly $1billion per annum to the economy.  

Colliers Director of Retail Leasing, Hadley Missell said “Perth is set for the second largest population growth of Australia’s cities over the next 10 years, forecast to grow by +14.1% by 2032. We expect this to flow through into Perth and increase in the Perth CBD, which is a fantastic outlook for Perth retailers.” 

Colliers have commenced leasing preparations on two properties for the Humich Group portfolio. The first is a 700sqm* retail tenancy at 110 William Street, Perth. Located on the corner of William Street and Murray Street Mall, this tenancy is suitable for fashion retailers and will enhance the fashion offering on Murray Street Mall.  Adjoining this property is 255 Murray Street Mall which has a 275sqm* tenancy, with another 500sqm* available on Level One.

Colliers Leasing Executive, Joel Humich said “With these properties, we are looking to reinvigorate the busiest corner in the Perth CBD and diversify the retail offering. This will connect the high-end luxury retailers to likes of Forrest Chase, David Jones and Uniqlo which will connect and create a more seamless retail experience for shoppers in Perth.” 

Currently on market, are three high-profile retail tenancies available for lease in the Perth CBD at 150 St Georges Terrace, 167 St Georges Terrace and 225 St Georges Terrace, Perth CBD’s main retail and business precinct. 

Mr Missell said that there were also leasing opportunities at the Perth Waterfront adjoining the Barrack Street Jetty. This is an ideal location for a large format food and beverage retailer to benefit from being near Elizabeth Quay, new hotels, office buildings, not to mention the most stunning Swan River views. 

Mr Missell said “225 St Georges Square is situated on the south side of St George's Terrace and currently available for lease. The 204sqm tenancy is positioned to take full advantage of the surrounding office workers and afterwork foot traffic. The tenancy is a great example of only a handful of available high end tenancies with a versatile use and a great opportunity to guarantee customers and patrons for years to come.” He said, 150 St Georges Terrace, Perth is a classic flagship store opportunity. 

Colliers Director of Research, Nik Potter said “Australia maintains healthy population growth prospects over the next 10 years, with current forecasts projecting up to +15% growth by 2032. The retail sector will derive several benefits as a result of this growth through increased spending and activity within the economy, and also will further solidify the strength of catchment for existing assets. Current supply forecasts show new retail floorspace is currently growing +4.2% by 2026; and hence is struggling to keep pace with population growth.” 

Due to population growth, the average amount of retail floorspace per person (factoring in pre-committed new stock to market) in Perth is also set to drop 7% by the end of 2032, as new retail floorspace added is set to not keep pace with inflation. This in turn will bolster the value of existing assets, supporting higher sales density within existing retail premises and supporting future rental growth.

Mr Potter said “assets have seen revitalised tenancy compositions as a result of more sustainable rents. From a foundational perspective, the tailwinds of persistent retail sales growth, recovered footfall and improved occupancy show green shoots for the sector.”

We have seen positive leasing spreads throughout the retail sector through the year to date, and on the back of low vacancy levels this has encouraged rental growth in 2023. Average gross face rents at Regional Centres have grown +1.1% nationally through Q3, and are now sitting +1.6% on an annual basis.

Large Format Retail Leasing Market

Large Format Retail average gross face rents grew +0.4% during Q3, representing the first rental growth for the sector since September 2021. Incentives have also remained broadly stable and have done so throughout the pandemic. Average incentives across the markets are currently at 14%, the lowest of the retail sub-categories. Large Format Retail space nationally however remains at a premium, with limited new supply expected to market, positioning existing space and assets well to capture robust population growth expectations nationally through the current cycle. 

Mr Missell said “within the Perth market, there is currently less than 45,000sqm of committed pipeline of new LFR space expected to hit the market by 2026, further enhancing the scarcity of prime LFR opportunities.”

Consumer spending for household goods continues to moderate in 2023, as the cost of living pressures starts to bite on the sector. However, spending for Large Format Retail is currently circa +25% above the pre-pandemic trend so is therefore expected to revert to more sustainable levels. 

Colliers State Chief Executive WA, Richard Cash said “Looking through to 2025, new LFR floorspace being added to the market nationally will grow at +3.6%, whereas we expect population growth to be +7.8% for this period therefore new supply of LFR Floorspace to market is not keeping pace with population growth, and potentially creates a critical shortage of LFR space in the market in future years.”