Perth shoppers are likely to remain cautious in their spending during the normally busy pre-Christmas retail period in response to declining house values, uncertainty about a looming Federal election and expectations of an interest rates rise, predicts Colliers International.
While there was some light at the end of the tunnel for retailers in CBD, economic data pointed to broader trading conditions that will be less certain for retailers across Perth, with retail turnover growth likely to remain subdued in the short-term, said Misha White, Colliers International research and urban economics manager.
“The continued migration of suburban and fringe office tenants into the CBD, in combination with a gradual recovery in the resources sector, is expected to consolidate the CBD retailers’ customer base,” she said.
“According to the ABS, nominally seasonally adjusted retail turnover declined 0.35 per cent year-on-year in the June quarter. This is only the second time financial year retail data has returned a negative reading since 1983.
“The weak WA residential building sector and low turnover of established dwellings is impacting on household goods turnover which contracted 7.67 per cent year-on-year in the June quarter, an acceleration on the 4.85 per cent contraction recorded in June 2017.”
While there were definite pockets of retailers finding trading conditions challenging, it was not all doom and gloom across the retail market, according to JLL WA head of retail properties Ann Manifis.
“It’s no secret that cafes, restaurants and takeaway food is showing the strongest growth. We are changing our habits on how we shop and where we spend our time and money, which is contributing to the positive sales growth in these categories,” she said.
While a large portion of the retail market was finding it tough due to rising costs and changes in how consumers spent money on Christmas, Ms Manifis said consumer sentiment remained positive.
Y Research principal Damian Stone ok described the retail sector as in flux, with a strong retail investment market due to continued demand for WA shopping centres.
“2018 is likely to see over a billion dollars’ worth of retail space sold. This signals long-term confidence in the Perth retail market,” he said.
“Despite these positive moves, retail fundamentals remain challenging. Retail sales in WA have been flat, falling by 0.4 per cent over the 12 months to September.
“Population and wages growth remains subdued. Competition for consumers is strong with online retailer Amazon continuing to impact brick-and-mortar retailers. The past 12 months has seen the closure of a number of retailers.”
Meanwhile, an array of retail development across Perth, including the $100 million revamp of Forrest Chase, the $6.5 million upgrade of Plaza Arcade and Raine Square in the CBD, as well as the completion of a $350 million redevelopment to Westfield Carousel in September, are set to have a positive impact.
Last week AMP Capital announced the start of the $800 million development of Karrinyup Shopping Centre, which will be complete within three years.
The centre will almost double in size from 59,874 square metres to 109,000 square metres, and will include additional supermarkets, large-format international retailers, an alfresco dining precinct and a 10-screen Hoyts cinema.
The $450 million extension of Westfield Stirling (formerly Westfield Innaloo) is set to start in 2019, while Garden City’s redevelopment will see the centre grow in size from 72,000 square metres to about 120,000 square metres.
Mr Stone said WA was at the beginning of a shopping centre development boom, worth more than $5 billion dollars.
“Over the next five to 10 years as these projects are completed, the retail offering in WA will change completely,” he said.
“These developments will add new department stores, supermarkets, international retailers and over 1000 speciality stores. Centres will become community focal points, facilitating the development of non-retail spaces, such as childcare centres, gyms, medical facilities, offices, apartments and public meeting spaces.
“Major shopping centres are evolving to become more than simply places to shop.”
Looking ahead to 2019, Colliers International retail investment services director Ben Tana anticipated trading conditions for Perth CBD retail to slowly improve alongside the incremental increases of white collar workers in the CBD and West Perth.
“In addition, a recovery in economic conditions and overall employment across the Perth metropolitan area will assist a recovery in retail turnover in WA during the next few years,” he said.