Investment worth tens of millions of dollars has been slated for a number of Perth’s shopping centres as owners bank on a retail revival.
WESTERN Australia’s retail property owners are taking advantage of the slump in consumer spending to extend and upgrade their centres in preparation for the next upswing.
While the media focuses on the vacant shop fronts that are an all-too-familiar sight in retail precincts across the metropolitan area, demand from national and international retail brands for quality shop space in Perth has remained steady.
The Property Council’s latest research data suggest retail development has failed to keep pace with population growth in the metropolitan area, an imbalance that translates into a potentially lucrative opportunity for property owners with the funding and confidence to invest in the downturn.
In all, 13 shopping precincts around Perth are slated for major upgrades or extensions, along with a handful of iconic retail properties, such as the Pavilion Markets site in Subiaco and Kings Square in Fremantle.
The Kwinana Hub is in line for a $45 million refurbishment, the City of Stirling is keen to transform the ageing Dianella Plaza into a bustling multi-purpose hub, and Westfield has revealed plans to double the size of Whitford City.
Jim Tsagalis is one of the leading agents in Perth’s retail sector and a man with a keen appreciation of the challenges facing retailers and property owners.
He pulls no punches in describing the retail market as “bloody hard” as consumers focus on saving rather than spending, but maintains there are still opportunities in the tough times, particularly for developers with the financial backing to move quickly and meet the next wave of demand.
The development plans for Perth’s CBD, including the City Link project and the development of the city foreshore, are likely to attract some major new property investors to the state.
“Our expectation is that some of the biggest investors in the Australian landscape will put their hat in the ring with regard to the foreshore and the Northbridge (City) Link,” Lease Equity managing director Mr Tsagalis said.
“With the huge upsurge in the city’s office population and with that likely to continue, there are a lot of investors who would gladly buy in the CBD if it was available.”
Of course it’s not just investors who are running the numbers on Perth’s CBD; high-profile retail brands are also keen to build their presence in this state.
“We are finding, generally speaking, there has been significant interest from international players as well as national players,” Mr Tsagalis said.
“While it seems counter-cyclical to the market, these operators are looking at the Australian market and saying ‘it’s time we expanded there’.”
For the nation’s retail giants – Coles, Woolworths, Myer and David Jones – new stores are a vital tool in driving sales growth.
Consequently these major players are looking for opportunities in WA’s growth corridors like Bunbury and Joondalup.
Additional drivers, including the state government’s changes to the planning regulations that govern shopping centres, are also fuelling development and expansion activity in the suburbs.
The introduction of the activity centres policy allows retail owners to increase the size of their shopping centres as long as an element of residential development is included.
Westfield Group’s ambitious plans to double the size of Whitford City into a busy town centre, transforming it into the biggest retail precinct outside the CBD, was a direct response to the regulatory shift.
Retail analysts agree the policy is likely to support development in centres that already enjoy strong links to major transport arteries, such as Subiaco, Joondalup, Fremantle, Mount Lawley and Victoria Park.
“What will be interesting is there might be opportunities to do things like serviced apartment hotels in areas where there is, for example, a lot of industry; so that could be the opportunity for shopping centres in those areas,” Mr Tsagalis said. And with the construction sector also grappling with tough times, the stars are aligned for shopping centre owners to take advantage of the weak construction sector to negotiate competitive building contracts.
“The opportunity is in planning those redevelopments now, the majors … have an appetite to expand and they are finding it hard to get locations and they are very keen to be included in (major) expansions,” Mr Tsagalis said.
“A lot of those negotiations can be relatively quickly completed, it’s the specialty stores that are more difficult.”
Even though the department stores are some of the poorest performers in all the retail sales data, their success depends on building sales through new store openings and this will drive their continued expansion in WA.
Retail redevelopment and centre expansion plans aren’t without their risks, especially for retailers, many who are already battling to keep their head above water.
The completion of Brookfield Multiplex and SPB Australia’s massive Claremont Quarter project in February shifted the focus of the upmarket retail precinct away from its historic heart, Bayview Terrace, and cut a number of retailers adrift.
Retail analysts suggest a similar fate could await retailers on the southern end of Rokeby Road if east coast property developer D2’s plans for the Subiaco Pavilion site gets the green light.
Mr Tsagalis said Subiaco needed to reinvent itself to ensure its continued success once the new football stadium was built at Burswood.
“If you put that amount of retail into one centre it will have a significant effect,” Mr Tsagalis said.
“I think naturally because it’s near the train, it’s likely to draw focus down Rokeby Road, but counter-balancing that is the huge increase in working population there so there is now a market during the day.”
The Property Council of WA is still working on its shopping centre research data but some early analysis of the sector’s growth over the past five years pointed to an undersupply of retail property.
However, Property Council deputy executive Lino Iacomella said this was likely to be addressed by the major expansion and redevelopment projects already on the table for a number of WA centres.
“Up until this year shopping centre growth has been capped at around the size of Carousel, that’s why there are about eight at the same size and that policy no longer applies and centres can now grow to their capacity,” he said.
“The best example of that is the Claremont Quarter, which has apartments in the centre … and we will see more of that and it’s the big policy story that will be directing the development of retail in WA.” Mr Iacomella said the policy shift was driving investment from a number of the large retail property developers, such as Lend Lease, Westfield and AMP.
“Lend Lease in particular has been significant in their acquisitions in Perth in the last couple of years, including Joondalup and they are an example of a institutional companies now looking more favourably in WA,” he said.
Despite this the Property Council is still looking for further reform in the sector, specifically the deregulation of retail trading hours and more investment in vital transport infrastructure.
