Perth’s embattled CBD retail market is undergoing a bottom-up revival, with strong enquiry from prospective food-and-beverage operators despite a number high-profile chain stores closing their doors.
Landlords have reported improving conditions in CBD retail, but a sustained recovery in a market plagued by high vacancy could still be a long way off.
Perth’s embattled CBD retail market is undergoing a bottom-up revival, with strong enquiry from prospective food-and-beverage operators despite a number of high-profile chain stores closing their doors.
New data from JLL shows Perth’s CBD retail vacancy rate fell 2 per cent to 15.6 per cent in the last three months of 2019, the first reduction in vacancy since the second quarter of 2017.
JLL WA strategic research manager Ronak Bhimjiani said the reduction in empty shops was largely driven by the prevalence of casual market leasing (CML), or pop-up stores, associated with the Christmas period.
“We call it the Christmas effect,” Mr Bhimjiani told Business News.
“CML activity is typical between October and January, so what you’ll find when we do our next batch of vacancy research in June, I wouldn’t be surprised to see the vacancy rate spike up a little bit because all of those CMLs would have closed down because they typically run for a six-month tenancy.”
Mr Bhimjiani said there were several positive drivers that could translate into increased retail demand, with retail spending in Western Australia trending upwards, according to figures from the Australian Bureau of Statistics.
He said wages growth in WA had also improved, while a marginal uptick in population growth would likely result in a higher retail spend.
“The third aspect, and this is the most important one, is the reduction in lending costs,” Mr Bhimjiani said.
“Interest rates on credit cards are quite low, considering what those rates would have been about five years ago, so people are more inclined to spend because the cost of money is quite cheap at the moment.”
He said the retail market overall was plagued by uncertainty, with several high-profile collapses spooking prospective tenants.
Recent chain stores to encounter problems include Jeanswest, which was placed into administration midway through January, and Curious Planet, which announced it would close all of its 63 Australian stores, including six in WA, over the next eight weeks.
German supermarket chain Kaufland also sent shudders through the market in January, when it announced it was halting a $500 million expansion into Australia.
Kaufland had plans to open between five and seven supermarkets in Perth over the next few years, Mr Bhimjiani said.
On the positive side of the ledger, agents at Colliers International have reported strong interest in a pair of CBD retail tenancies, recently leased to food-and-beverage operators.
Colliers International WA head of retail leasing, Ahmad Ibrahimi, told Business News the agency received more than 100 enquiries for the two tenancies, located at 172 St Georges Terrace and 89 St Georges Terrace.
Mr Ibrahimi said while there was considerable vacancy in fashion tenancies, particularly in the Hay Street and Murray Street malls, there were fewer opportunities for new food and beverage operators in key CBD locations.
“For a cafe of 30 to 50 square metres or even a bigger premise of 300sqm, while there is a lot of demand for them, there is not always the right space and opportunity,” he said.
Mr Ibrahimi said several national and international retail chains were also beginning to run the ruler over Perth’s CBD, attracted by several redevelopment and repositioning initiatives at existing arcades.
In the past 12 months, Charter Hall has spent $75 million upgrading the retail offering at Raine Square, superannuation fund ISPT spent $100 million redeveloping Forrest Chase, while Piccadilly Arcade is currently undergoing a comprehensive refurbishment.
ASX-listed property funds manager Dexus is also expected to begin a $200 million redevelopment of Carillon City later this year.
“The retail market in the CBD is evolving as new and better spaces become available,” Mr Ibrahimi said.
“Whether it’s Forrest Chase or Raine Square or Carillon coming up and Piccadilly, they are all great opportunities that generally will catch the eye of better operators around Perth, whether they be from main street retail or national operators from Melbourne or Sydney to come in.
“That was the biggest problem we had before, we didn’t have the space for these people to come so we weren’t able to host them.
“Perth’s CBD is changing quite drastically at the moment.”
