After visiting Western Australia this week, there are a lot of positives to be seen across many asset classes in Perth’s commercial market. Despite changing market conditions, the underlying fundamentals for the Perth commercial markets are still robust. For industrial, vacancy is tipped to be at its lowest rate on record which has been instrumental in growing rents across the metropolitan area. With little new supply in the market, the mismatch between demand and supply is likely to continue to have an uplifting effect on returns and capital values despite the increase in interest rates.
For the office market, Perth CBD remains one of the most vibrant in the country with office occupancy some of the highest in Australia. Not suffering from the same lockdowns, the local workforce is spending more time in the office and as a result we are seeing businesses actively enquiring for expansion space which will see a growth in take up, reducing vacancies. For the first time in a while, face rentals have seen some improvement while incentives do continue in the marketplace. Capital expenditure remains key for owners of lower grade stock, keeping their asset well positioned for a new or expanding tenant. While investment activity has continued, a longer term view has been taken by local investor groups resulting in little change in yields during this year.
It’s still an interesting time for retail in the current environment. While online sales have grown in recent times, notably in response to COVID-19, many of Perth’s retail strips bucked the trend and still performed well in the digital environment. Rising inflation continues to be a concern for consumers, which has filtered into the retail market, with the longevity of interest rate movements and inflationary pressures being key indicators of continued success of our retail strips over the next 12 months. Despite the rising cost of funding, savvy buyers are still capitalising on opportunities across retail, particularly in strips which have a proven track record of high occupancy. Vacancy across Perth’s retail strips has continued to decline for the second year in a row, with vacancy currently sitting at 9.63 per cent across five strips including Claremont, Cottesloe, Subiaco, Leederville, and Mt Lawley.
