Perth CBD retail vacancy rate reaches new record high in 1H22

PERTH, 20 JULY 2022 – JLL Research has released 2Q22 statistics on the Perth commercial retail sector, with figures showing a deterioration in CBD retailing conditions.

CBD retailing conditions took a turn for the worse, with the latest Perth CBD retail vacancy rate reaching a fresh high of 20.6%. The reading comes in 2.7 pps higher than figures reported in 2H21, with the Perth CBD continuing to hold the highest retail vacancy rate in the country.

JLL Director of Research - WA, Ronak Bhimjiani said “the further weaking of CBD retail conditions was a disappointing reading considering a raft of positive news for the CBD since the last reporting period.

“With the removal of mask mandates and social distancing restrictions as well as the re-opening of the WA border all occurring over the last six months, sentiment towards CBD retailing conditions had lifted. However, the expected uplift has not transpired, with the CBD retail vacancy rate now reaching a fresh high of 20.6%” said Mr. Bhimjiani.

The result is in stark contrast to broader retail spending conditions, with overall spending patterns continuing to surprise on the upside. WA’s retail spending growth has remained elevated, up 6.6% y-o-y as of May 2022 and significantly higher than the national average of 5.1%.

“The break-down of retail spending also shows that spending in cafes and restaurants grew by 16.7% y-o-y as of May 2022 while clothing, footwear & accessories spending was up 11.5%. Despite positive consumer spending patterns, this does not seem to correlate through to spending in the CBD, with businesses instead, shutting down over the last six months”.

Figure 1: Perth Retail Vacancy Rates – CBD versus non-CBD Centres

Source: JLL Research

On the other hand, non-CBD centres saw vacancy rates trend lower – down from 5.2% in 2H21 to 5.0% in 1H22. This was driven by a reduction in vacancy rates across neighbourhood and large format retail (LFR) centres.

“Society is firmly entrenched with the hybrid working model, where a proportion of traditional office work is being carried out from home. This is playing into the hands of neighbourhood and LFR centres, with traditional office workers diverting spending towards local shopping centres.

“With businesses and staff seemingly embracing the hybrid-working model, a mind-set shift needs to occur when debating on how to attract people back to the CBD. As much as office workers are needed to ensure a thriving CBD retail sector, so are consumers. A range of other measures are required to entice visitation to the CBD for reasons other than work”.

JLL Managing Director – WA, Angelo Amara said “a continued collaborative approach is required across Government, advocacy groups, business owners and landlords to achieve shared outcomes”.

The latest ABS data shows WA’s population grew by 1.1% in the year to December 2021, significantly higher than the nation’s population growth rate of 0.5%. Net interstate migration into WA recorded its strongest reading on record in the last three months of December 2021, with approximately 5,000 people moving to WA. Furthermore, most other economic indicators show WA’s economic environment to be stronger versus the rest of the nation.

“We are in a position of unique economic strength, bolstered by strong labour market conditions and strengthening population growth. Additionally, despite the shift towards hybrid-working conditions, the Perth CBD office occupancy rate of 63% as of May 2022 is higher than markets like Melbourne (48%) and Sydney (55%). Despite these positives, we still remain in an unfortunate position of having the highest CBD retail vacancy rate in Australia” said Mr. Amara.