Property developers are looking beyond the current economic gloom and are preparing for further expansion in retail business in Western Australia. The latest survey of future developments proposed in the WA retail property sector has identified some 36 major new developments and extensions over the next five years.
The 2008 Retail Development Survey prepared by the Property Council of Australia and Lease Equity uncovered retail developments worth over $1 billion that will add some 236,055sqm of new retail space in WA between 2008 and 2012.
The key survey findings, include:
• Slightly less than half (44.6%) of the extra space will comprise new centres, 52.6% are extensions to existing centres, and 2.8% is a result of refurbishments.
• The extra retail space is evenly spread across most centre categories, with slightly more (31.3%) planned for sub-regional centres. However, no extra space is planned for major regional centres.
• The largest concentration of the planned extra retailing space is to be located in the southern metropolitan suburbs of Perth (37.4%), followed by 24.6% in the northern suburbs. 19.7% of space is located in Perth’s eastern suburbs and 18.3% of the extra space is occurring in the Perth CBD.
• The peak year for completion of the expansions and new developments is 2010 (32.2%, by space).
• 170,855 sq m or 72.3% of developments are being undertaken by private developers.
• An additional 50,947 sq m of development has been postponed from earlier development applications.
Property Council Executive Director, Joe Lenzo, said the results show that developers have strong confidence in the WA retail sector in the medium to long term. “The 2008 survey shows a 4% increase in proposed gross lettable area from the 2007 results despite significant changes in the outlook for the state economy”.
The largest developments identified in the survey were:
• Lakeside Joondalup by ING Real Estate – 21,750 sq m
• The Shops, Ellenbrook by the Insurance Commission of Western Australia – 20,000 sq m
• Cockburn Gateway Shopping City by the Perron Group – 20,000 sq m
• Rockingham City Shopping Centre by Colonial First State - 18,200 sq m
• Claremont Quarter by Hawaiian/Brookfield Multiplex – 15,900 sq m
Associate Director of Lease Equity, Adam Musbah, said tenant demand is still strong, in particular with food retailers who are typically sheltered from a downturn in the market. “We are finding that these retailers are still very
keen to establish new operations, especially in the CBD where office workers and visiting shoppers are driving strong demand. It becomes a population based scenario; the increasing population results in an increased retail spend.”
Adam Musbah said the Perth CBD will see an additional 43,000 square metres of retail stock, with Century City the largest project supplying over 30% of that space. “The first stage of Century City is due to open before Christmas this year and will house a number of leading international brands including; Hardy Brothers Jewellers, Mimco, Veronika Maine and Guess. This additional retail space will be fed by a CBD working population which we estimate will increase by over 25,000 people by 2012.
“In the face of the economic crisis, institutional investors are finding it increasingly difficult to raise capital in order to get developments off the ground. With private investors, we are finding there is a converse trend to what the institutions are expecting. With the current market causing asset values to diminish, private investors over the past few years have experienced strong growth and stronger balance sheets than ever before. This in-turn is making it easier for private investors to raise capital or fund developments from their own capital surplus. Until at least 2010, this research shows that private investment will be higher than institutional investment,” said Mr Musbah.
The survey found that a majority of proposed new developments (69%) will occur in smaller sub-regional and neighbourhood centres. “Expansion in the larger regional centres continues to be restricted by development limits by the State regulations. The Metropolitan Centres Policy, which includes guidelines for retail centre developments, is currently being reviewed by the Government. The Property Council is actively working with the Government to create a more realistic policy, which accommodates changes in demographic and property usage trends around existing and new centres. A new policy is expected in 2009,” said Mr Lenzo.
9 December 2008
Joe Lenzo, Executive Director Property Council of Australia (WA): 0419 044 768
Adam Musbah, Associate Director Lease Equity: 0412 767 699