Perth retail property market strong: Herron Todd White

Perth retail property market strong: Herron Todd White
Perth retail property market strong: Herron Todd White

The addition of new retail space in the Perth CBD has created a sought-after market for “secondary” retail properties, according to the December market report by Herron Todd White

Herron Todd White commercial valuers anticipate about 15,500 square metres in new commercial stock will be constructed in in the Perth CBD in 2012 following on from about 24,000 square metres added during 2008 and 2009. 

Demand for new stock remains strong, with the Perth CBD retail market benefiting from tight vacancies in both offices and inner-city residential. Retail vacancy rates hover below 5.5%, with the overall escalating stock levels matched by growing demand. 

“To some extent the significant addition of new space has resulted in this market becoming a two-tier market, with the older developments increasingly being perceived as a ‘secondary’ property market,” the report says. 

“Property sales in this segment of the market, which are predominantly made up of strata-titled unit properties, generally have no shortage of willing buyers looking to purchase either leased or vacant properties. 

“Transactions in this sub-market have been quite limited, although this is due to the lack of supply as these properties are generally very tightly held.” 

Despite the demand for these assets, buyers remain price-sensitive and according to Herron Todd White “are not keen on setting new price benchmarks”. 

Outside of the Perth CBD, investors in bulky good stores in Perth should expect higher rental returns in 2012, while regional supermarkets will remain sought after by institutional investors, according to the report. 

The report notes that over recent years, with shopping centres have increased in size while the introduction of bulky goods developments “agglomerating a number of larger retailers”, which has intensified competition significantly. 

“The tenants of bulky goods properties tend to comprise large national retail companies. Despite most bulky good retailers having endured difficult market conditions over the course of the year, rental rates have generally remained steady,” says HTW. 

“This appears to be due to a limited supply and limited construction, and so it is likely that rental rates will rise over 2012.” 

“Assets in this category are also tightly held, as they provide relatively high returns with little risk of default.” 

Notable bulky good properties sales this year include a 2,200-square-metre Cannington store at 1429-1433 Albany Highway, which sold for $6.65 million at a passing yield of 7.4%. Tenants include EB Games, Avanti Plus and The Outdoor Furniture Specialists, with a weighted average lease expiry of 3.85 years. 

Regional supermarkets remain the competitive retail sector, “with owners continually under pressure to refurbish, extend and maintain to ensure a desired tenancy mix”. 

“This asset group is limited to institutional investors who have the expertise in managing these assets. There have been no significant sales this calendar year, aside from capital raisings via the establishment of retail trusts,” HTW says.

Sales included the Thornlie Square Shopping Centre, which sold for $21 million, at a passing yield of 11%. The shopping centre, which has a gross lettable area of 14,583 square metres, was refurbished in 2010 at a cost of $2.5 million. The property was purchased by a private investor following a lengthy 12-month marketing campaign.

The report suggests investors steer clear of older-style strip shops and showroom developments, which are becoming increasingly obsolete.

“As expected this lower end of the market has had a challenging year. We have noted over the year that these properties require lengthy selling periods and competitive pricing. Buyers in this market tend to possess limited capital and a limited potential in acquiring the necessary finance.”

 Photograph by eGuide Travel

 

 


Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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