Lending restrictions have loosened, in line with a falling interest rate that has given way to an emerging middle-class economy. It’s a trend that all major cities across Australia are experiencing, but in Western Australia, where commercial interest has traditionally waned, things are heating up.
“The current market is ripe for investment opportunities,” says Ahmad Ibrahimi, head of retail leasing for the Perth arm of property firm Colliers International.
“Interest rates are at an all-time low, while spending per capita in WA continues to outpace the national average. As retail footprints reach saturation and in some cases are cannibalising one another in other parts of Australia, in WA, landlords are still responding to growing demand from retailers looking to come west.”
Take a look at the breadth of international chains that have made their way to the state over the past few years and it’s easy to see that interest is swelling out west. Big-name brands such as Uniqlo, Zara and H&M now call WA home, with international giant Costco’s first of two confirmed stores set to open next year.
“Retailers, especially those who are gearing up to enter the west, stand to benefit the most from this as landlords look to host brands and concepts that help to differentiate them from others,” Ibrahimi suggests.
So, with construction on the horizon and a wave of new brands, both international and domestic set to make WA the next big retail market, where can eagle-eyed franchisees look for a bargain business opportunity?
Similar to its east coast counterparts, WA’s capital presents the strongest opportunity for prospective small business owners. However, unlike Sydney and Melbourne, an oversaturation of offerings has yet to dwindle profitability for tenants.
“The CBD provides a great platform to target an ongoing rotation of visitors and white-collar workers, with footfalls throughout the year remaining strong and conversion rates following closely,” Ibrahimi says.
The resulting spark in retail interest has seen a number of prominent landlords invest heavily in restructuring processes – with the aim of making their locations more appealing to prospective business tenants, particularly as new developments spring up across Perth.
“There is a lot of economic activity currently happening across WA,” Ibrahimi continues.
“Perth CBD leads this progress with several major refurbishments and redevelopments by key landlords, including the redevelopment of Carillon City and Piccadilly Arcade and the completion of work in Enex 100, Raine Square and, more recently, Forrest Chase in the heart of the city.”
In Sydney and Melbourne, the infrastructure race seems to be slowing, however, across the Perth CBD, construction and development are underway. In fact, the city’s newest developments have an underlying value of just below $12 billion, making Perth one of the fastest growing regions in Australia.
Ibrahimi says residential interest has expanded the city scope, giving birth to a number of as-yet-untapped areas.
“Historically, Perth has had limited retail options between the CBD and a few established regional shopping centres. That has changed significantly during the last decade as the housing market expanded north towards Alkimos, south towards Mandurah and east along major growth corridors.”
Southeast of the state’s capital, the population growth impact is plain to see, as highlighted by the recent $350 million Westfield Carousel redevelopment.
Located just 12 kilometres from the Perth CBD, the retail precinct has a total trade area population of 640,000, buoyed by its proximity to both Curtin University’s Bentley Campus and Murdoch University’s South Street Campus.
The 2018 redevelopment saw an additional 70 specialty retailers added to the mix, taking the total number of offerings to 350 across the fashion, food, lifestyle, dining and entertainment verticals.
The redevelopment – alongside the launch of fellow retail precincts Yagan Square and Raine Square – has helped to extend the Perth CBD outside its traditional town borders.
“The combined investment of over $2 billion has resulted in world-class retail offering across the state that has injected billions of dollars into the local economy, creating jobs and helping to improve the retail sector,” Ibrahimi says.
While the Westfield Carousel project has captured much of the state’s attention, a number of other inner-city developments are also presenting value-for-money opportunities.
Located in the heart of Perth’s CBD within the reach of the heritage-listed Horseshoe Bridge, Yagan Square is the flagship public space of the Perth Council’s new City Link.
The diverse, multi-use region celebrates Western Australia’s cultural heritage and landscape through a series of art spaces, retail offerings and digital implementations. Bearing a price tag of over $73 million, the much anticipated area opened to the public in March last year, after more than 10 years of planning.
Encased within the 1.1 hectare site is the booming William Street Mall, a lively pedestrian thoroughfare lined with shops and alfresco dining, linking the Perth CBD with Northbridge.
It was a significant development for the city, which had traditionally offered little pre- and post-match entertainment for its AFL-mad inhabitants. Yagan Square’s introduction provided an additional nightlife boost, attracting a number of micro-breweries and millennial-themed offerings.
“Local, interstate and international visitors have Perth Arena and Yagan Square at their feet with the added bonus of direct train services to key destinations,” Planning Minister Rita Saffioti reveals.
“As construction and development progress over coming years, we will see retail, hospitality and hotel operations continue to boost the state’s economy.”
But while Yagan Square remains the jewel in the Perth City Link crown, it isn’t the only major development generating interest in the city.
Elizabeth Quay, the $2.6 billion landmark waterfront development designed to reconnect Perth city with the Swan River, is yet another initiative turning heads.
The ambitious project was named best of the best by the Urban Development Institute of Australia, thanks to its transformative approach to retail innovation and growth.
“Elizabeth Quay has restored a valuable physical and cultural connection between Perth’s city centre and the Swan River, a connection that had previously been cut by roads and decades of development,” Metropolitan Redevelopment Authority CEO Sean Henriques says.
“People come out of the high-rise buildings to enjoy lunch by the water. They are returning to the city on the weekend, or staying longer after work to attend shows and events with their families and they are forging new connections and ways of engaging with the city and its river.”
Bolstering the new region is the development of global business Chevron’s Australian headquarters. The new 29-storey, mixed-use Chevron tower has added more than 54,000 sqm of office space, however the big boom for prospective tenants comes in the wealth of expected foot traffic.
“Chevron’s new headquarters will contribute to delivering a vibrant, activated Elizabeth Quay, which is ultimately expected to be home to 1400 people and 10,000 workers,” Saffioti says.
The unique mix of commercial, dining, entertainment, retail and community uses have seen the region grow in stature, not only in Perth but across the state.
“Elizabeth Quay will continue to be an exciting place to live, work and visit and will generate essential economic activity for many years to come,” Henriques says.
Since the collapse of the state’s mining industry, regional and sub-regional areas in Western Australia have struggled to stay relevant, with little to draw new entrants to the town centres. However, a strong state government approach to infrastructure and education is slowly helping to build back appeal.
“While we obviously had an inflated figure during the mining boom, which included interstate workers who settled in the regional areas, today, the steady and organic population growth is evident across the state, with key indicators recording a 0.93 per cent growth between 2017 and 2018,” Ibrihimi reveals.
“And while the larger shopping destinations such as Westfield Carousel, Morley Galleria and Garden City offer very competitive retail opportunities, smaller neighbourhood centres continue to draw the most interest from retail operators due to their relevance to the residents in nearby communities.”
From a geographical perspective, however, Western Australia offers more than just CBD and sub-regional opportunities. The nation’s largest state by area is largely rural, and while population numbers in these towns pale in comparison to the Perth and Fremantle regions, they shouldn’t be ignored.
Significant government investment is slowly building infrastructure and appeal in the state’s more rural town centres, with areas such as Geraldton, Bunbury and Albany emerging from the post-mining-boom slumber, repositioned as thriving regional tourist spots.
“With tourism investments picking up and more airline connections to Perth, including the recent introduction of direct flights between Perth and Tokyo, we expect a surge of interest for places like Margaret River, Bunbury and Albany to the south and tourist hotspots in Geraldton, Exmouth and Broome to the north,” Ibrahimi explains.
“These regional centres already enjoy substantial interest from intrastate travellers and will continue to receive more visitors from other parts of Australia and overseas tourists, leading to strong demand for retail operators.”
Primarily driven by pad sites for Quick Service Restaurant options, medical and childcare centres, pharmacies and most recently entertainment, interest is slowly rising.
But a new industry discovery looks certain to accelerate that growth. As the dust settles on the state’s iron ore, gold and copper mining sectors, exploration in lithium hydroxide is revitalising the prospect of a secondary resource-driven boom.
Several regional sites across Western Australia have been bolstered to address the growing demand for the material, which will fuel the next generation of car and smartphone batteries.
Ibrahimi reveals that the state’s resource-driven economy is set to thrive as result, turning Western Australia into a major global player and immigration hotspot.
“The world’s largest lithium hydroxide processing plant outside of China opened in Kwinana, just south of Perth earlier this year,” he explains.
“The $400 million facility looks set to be joined by a $1 billion plant in Bunbury. In total, WA is expected to produce more than a third of the world’s demand for lithium. Its significance to the local economy, job creation and state budgets cannot be stressed enough.”
As new developments take shape across rural Western Australia, towns that have previously suffered in the fallout of the mining collapse look set to be revamped, with entrepreneurs ready to capitalise.
Ibrahimi suggests a driving demand for workers is a sure-fire sign of sector on the precipice of a great revival.
“Job creation industries will continue to drive interest in the south of the state, especially in regions like Bunbury. We are confident regional towns will continue to be a powerhouse for the state’s economy and will, in turn, continue to benefit the retail sector.”
As population growth continues across Western Australia, new retail precincts are certain to present value-for-money opportunities, particularly for those operators willing to commit early.
Despite the upside, however, Ibrahimi suggests the state is not without its challenges.
“Retail has always been an evolving industry and that couldn’t be any truer than today. In addition to international challenges with global trade wars and regional instabilities, consumer habits continue to drift away from the conventional ‘customer’ that the industry was all too comfortable with,” he says.
“Throw in online shopping growth trends across the country and we find ourselves in unconventional territory that demands the best of our attention and effort. WA is not immune to any of these challenges, and retailers are expected to do everything they can to provide a level of ‘future-proofing’ as we move through this uncharted route.”
The retail leasing expert advocates strong due diligence on the part of the prospective franchisee, offering two pieces of advice: know your customers and know your lease.
“It is vital to know as much as possible about your customer base, their demographics, shopping habits and spending power. This will allow you to best judge a location and its suitability for your business,” he explains.
“After this stage, get to know your lease. This is not just a review of the document but more importantly understanding its human components. Know your landlord, the leasing agent, your future property manager, your adjacent neighbours. If you are part of a retail precinct or shopping centre, get to the nitty-gritty details of the marketing budget and plan. Today, it is more about interacting with the customer in all aspects of their lives, and data and research is key to this.”