The Insight Perth Retail Strips
RWC WA | September 2024
Perth retail strips
SCARBOROUGH BEACH RD, MOUNT LAWLEY
ROKEBY RD, SUBIACO
BEAUFORT ST, MOUNT LAWLEY
ALBANY HWY, VIC PARK & EAST VIC PARK
BAY VIEW TCE, CLAREMONT
NAPOLEON ST, COTTESLOE
SOUTH TCE, FREMANTLE
Introduction
The Perth retail strip market has seen a notable uptick in occupancy across the eight surveyed areas. This improvement comes amid a favourable economic climate in Western Australia, characterized by robust economic performance, low unemployment rates, and a significant boost in population growth.
These positive economic indicators have had a ripple effect on the residential market, which had previously been stagnant for an extended period. The Perth housing sector has experienced substantial price increases and rental growth rivalling all other Australian markets. This surge in residential sales prices can be attributed to two main factors: growing interest from investors attracted by low vacancy rates and high rental yields, and the need to accommodate the expanding population during a period of limited housing supply.
The flourishing housing market has, in turn, bolstered consumer confidence, driving retail trade, particularly in the food and homeware sectors. This economic vitality has not gone unnoticed by investors, with Perth witnessing unprecedented levels of commercial property investment activity, peaking in 2021. Interstate buyers have shown particular interest in these investments, drawn by the state’s strong economic position, growing population, and the scarcity of new retail supply.
As interest rates are anticipated to decrease next year, there’s renewed focus on the investment landscape. Local private investors and owner-occupiers are also competing for quality properties, although the volume of transactions has significantly decreased. Despite rising funding costs, astute buyers continue to seize opportunities in the retail sector, especially in strip locations with a proven history of high occupancy. While yield expectations have shifted over the past 6-12 months, sales typically range between 5% and 7%.
The retail landscape remains intriguing in the current environment. Although online sales grew substantially in recent times, these levels have now stabilised. Local retail strips continue to perform well, defying the digital trend. High inflation remains a concern for consumers, impacting the retail market, but recent data suggests this is becoming more manageable.
Looking ahead, future interest rate movements are likely to be the key determinants of continued success for these retail strips over the next year. While challenges persist, the resilience and adaptability of Perth’s retail strip market, coupled with the state’s strong economic fundamentals, position it well for continued growth and stability.
Vacancy by retail strip
The recent retail survey results have yielded some impressive outcomes, with individual markets showing improvements across the board. Particularly encouraging is the continued decline in the overall average vacancy rate, signalling a robust recovery in the retail sector.
Our comprehensive survey encompassed eight key locations, examining a total of 691 shop fronts that represent nearly 92,000sqm of retail space. The current vacancy rate stands at 6.33%, a notable improvement from last year’s 8.42%. This positive trend is even more significant when compared to the challenging period of 2019-2020, which saw a sharp increase in vacancies due to pandemic-related lockdowns.
The composition of retail strips has evolved in response to changing consumer behaviours and preferences. Interestingly, some markets are defying national trends.
Bay View Terrace and Napoleon Street, for instance, remain strongholds of fashion retail, a category that has become increasingly rare across the country. Similarly, Albany Highway, particularly in the east, maintains a strong café/ food segment.
Other markets in our survey showcase strong levels of food and service establishments, sectors that have experienced substantial growth in recent years. These segments not only contribute to retail trade but also enhance local vibrancy by necessitating in-person patronage. For areas with higher vacancy rates, we anticipate an influx of food and service businesses. This shift is expected to invigorate these locations, as these categories typically require physical presence and interaction, thereby increasing foot traffic and overall market activity.
Source: RWC WA
Bay View Terrace, Claremont
Retail vacancy (sqm)
Bay View Terrace has experienced a remarkable turnaround over the past few years, with vacancy rates plummeting to an impressive 1.25%, represented by just a single vacant shop. This area has historically maintained low vacancies, even during the pandemic, benefiting from shifting market dynamics that saw increased community engagement with neighbourhood retail.
The work-from-home trend bolstered patronage of local high streets, particularly for food-based experiences and services requiring in-store visits. While vacancy rates briefly spiked to 7.23% in 2021-2022, they have now retreated to an all-time low. This resurgence is largely attributed to strong market confidence, fuelled by robust employment figures and substantial gains in house prices.
Despite the high inflationary environment, increased retail expenditure has persisted, notably on discretionary goods. The anticipated return to low interest rates in 2025 is expected to further enhance retailers’ returns, a fact not lost on investors. While few assets change hands in this prime location, yields remain competitive, averaging between 4-6%, even in the face of current financing costs.
This positive trend underscores Bay View Terrace’s resilience and attractiveness as a retail destination, positioning it well for continued success in the evolving retail landscape.
Retail mix
Bay View Terrace boasts a unique retail mix, uncommon in Australian retail strip markets. While many areas have shifted away from clothing and soft goods retailers, this strip maintains a significant 28.18% of its retail space dedicated to this sector, with a strong emphasis on women’s footwear and fashion. This stands in contrast to the broader trend of such retailers moving towards online sales models or relocating to larger shopping centres.
Over the past five years, there’s been a notable increase in service-oriented businesses, now occupying 19.06% of the total space. This growth encompasses beauty services, optical stores, and traditional offerings like Australia Post and real estate agencies.
The strip’s limited food retail presence remains an area of interest. With growing customer demand for dine-in, takeaway options, and specialized food venues, this sector has expanded its footprint over the last two years. This trend is expected to continue, potentially reshaping the strip’s composition and enhancing its appeal as a diverse shopping and dining destination.
Source: RWC WA
*estimate
Napoleon Street, Cottesloe
Retail vacancy (sqm)
Napoleon Street has demonstrated resilience in recent years, despite challenges posed by the pandemic. After experiencing slightly elevated vacancy rates of 5.42% in 2022 and 2023, this year has seen a reduction to 4.18%, representing just one vacant shop. This tightly held market is expected to return to the zerovacancy profile observed in 2019, a testament to the affluent local catchment’s long-term stability.
The strip’s appeal to tenants remains high, driven by the area’s above-average disposable income and further bolstered by rapid growth in the local housing market. With median house prices reaching record high levels of growth over the past four years, retail expenditure in this catchment has shown no signs of slowing, even in the face of higher interest rates compared to the pandemic period.
Investment opportunities in Napoleon Street are limited, but its attractive price point and strong local demand, coupled with competitive interest from East Coast buyers, keep it firmly on the radar of private investors with long-term goals. The strip’s resilience and consistent performance make it a prime location for those seeking stable retail investments in Perth’s high-end market.
Retail mix
Napoleon Street continues to defy broader retail strip trends across Australia, with over a third of its retail space dedicated to the clothing and soft goods sector - a segment that has grown further in the past 12 months. This unique positioning capitalizes on its reputation as a high-street fashion destination, featuring local designers and attracting visitors seeking alternatives to traditional shopping centre offerings.
Cafés have become an increasingly significant presence, now occupying 19.18% of the retail space. This growth caters to both local patrons and visitors, enhancing the area’s appeal as a lifestyle destination. Another flourishing segment is the “Other personal & household goods” category, primarily driven by jewellery retailers, which complements the strip’s fashionforward identity.
Interestingly, services in this market represent only 10.34% of occupancy, primarily consisting of beauty and real estate businesses. This proportion is notably lower than typical retail strip compositions, underscoring Napoleon Street’s distinctive character and focus on fashion and lifestyle experiences. This unique retail mix reinforces Napoleon Street’s position as a specialized shopping precinct, setting it apart from more conventional retail strips across the country.
Rokeby Road, Subacio
Retail vacancy (sqm)
The Subiaco retail market has experienced significant fluctuations in recent years, influenced by local developments and shifting regional sentiment. However, the past twelve months have shown encouraging signs of recovery, with vacancy rates dropping to 10.76% - the lowest since 2017. This positive trend signals a resurgence in the area’s retail landscape.
Subiaco maintains its strong reputation as a hub serving residents, workers, and visitors alike. The investment climate remains diverse, attracting both local investors and owneroccupiers seeking quality spaces for small businesses. This renewed interest is further bolstered by substantial gains in local residential property values, with both houses and units experiencing notable appreciation over recent years.
These positive developments have reinvigorated Subiaco’s status as a vibrant locale, effectively countering previous periods of uncertainty. The area’s retail strip is gradually reclaiming its position as a dynamic and attractive destination, reflecting the broader resurgence of the local property market and community confidence.
Retail mix
Rokeby Road continues to evolve, with notable shifts in its retail composition. The clothing sector now represents 10.53% of occupancy, a significant decrease from previous years. However, the other personal and household goods sector remains strong, occupying nearly a quarter of all space, reflecting sustained discretionary spending in the area.
The flourishing residential market has bolstered both this segment and the furniture, housewares, and appliances sector, which has a higher presence here compared to other locations. Food-related businesses have experienced the most substantial growth, aligning with local demographic preferences. Specialized food outlets and cafes now account for a quarter of all retail stock.
Services maintain a steady presence, with banks continuing to be major tenants along the strip, complemented by medical and beauty services. This diverse mix of retail and service offerings underscores Rokeby Road’s adaptation to changing consumer needs and local market dynamics, creating a vibrant and varied shopping precinct.
Oxford Street, Leederville
Retail vacancy (sqm)
The Leederville strip has shown encouraging signs of recovery, with vacancy rates dropping to their lowest level since 2018. This positive trend is particularly notable for Oxford Street, which once boasted zero vacancies in earlier survey years. While no longer at zero, it still maintains an impressive 5.99% vacancy rate, representing just three vacant shop fronts.
Leederville continues to be a vibrant location, especially known for its lively night-time atmosphere driven by food-related businesses. The area’s resilience is evident in its ability to attract tenants and maintain its appeal despite previous challenges.
Investment activity in recent years has been limited, influenced by a combination of factors including previously low interest rates and high demand from interstate buyers looking to invest in Perth. This created a competitive yield environment, which has largely persisted despite subsequent interest rate increases. Currently, yields remain attractive, typically ranging between 5-7%, reflecting the area’s ongoing appeal to investors and its potential for future growth.
Source: RWC WA
Retail mix
Oxford Street continues to evolve, with a notable decline in clothing and soft goods retailers across successive vacancy counts. The café and restaurant segment has seen consistent growth, now occupying nearly 50% of all tenancies. This shift capitalizes on the local workforce and after-work crowd, cementing the street’s reputation as a dining destination. The strip’s appeal is further underscored by the presence of national chains, which have established tenancies to tap into the area’s robust discretionary food retail market. Complementing this trend, the specialized food segment has expanded to 14.88%, offering a diverse mix of takeaway options, luxury consumables, and grocery items catering to the high daytime population.
Interestingly, services remain a limited portion of the strip at just 4.40%, highlighting Oxford Street’s transformation into a predominantly food-driven precinct. This composition reflects a strategic alignment with local demographics and consumer preferences, positioning the street as a vibrant “foodie” hub in Leederville’s retail landscape.
Beaufort Street, Mount Lawley
Retail vacancy (sqm)
Beaufort Street, one of the largest strips in our retail count, has shown remarkable improvement, now recording its lowest vacancy rate since the inception of our survey. This year, only 9 vacancies were recorded, down from over 20 just a few years ago, representing a vacancy rate of 7.85%.
The strip experienced significant challenges during the pandemic, with shutdowns and restricted trade leading to the closure of numerous local businesses. The recovery process, including finding new tenants, was prolonged. However, recent improvements in local office activity have contributed to increased foot traffic during daytime hours.
Unlike other strips in our count, Beaufort Street boasts a diverse mix of businesses, making it unique in not being associated with any single dominant use. This variety contributes to its resilience and broad appeal. Following a national trend, services have seen an uptick in presence along the strip. This sector has proven instrumental in driving in-store customer traffic, particularly important given the ongoing competition from online retail in other segments.
Source: RWC WA
Retail mix
Beaufort Street’s diverse retail landscape has experienced notable shifts, with a resurgence in the café and restaurant sector. The specialized food retailing segment has shown even more rapid growth, indicating a strong local appetite for unique culinary goods. In contrast, the clothing and soft goods sector has further reduced its footprint, a trend seen across various locations due to the growing dominance of online sales. Services, particularly in beauty and hairdressing, continue to expand, playing a crucial role in attracting customers to the strip.
The buoyant housing market has bolstered consumer confidence, reflected in increased retail expenditure. Beaufort Street maintains a stronger presence of furniture, housewares, appliances, recreational goods, and personal and household items compared to other areas. This trend aligns with the growing population and rising property values, as residents continue to invest in their homes. This evolving mix underscores Beaufort Street’s adaptability to changing consumer preferences and market conditions, positioning it as a dynamic and resilient retail destination.
Scarborough Beach Road, Mount Hawthorn
No. of shops 72
Retail vacancy (sqm)
Scarborough Beach Road in Mount Hawthorn, a recent and welcome addition to our retail count, has exhibited remarkable consistency over the past two years. This vibrant strip has quickly established itself as a standout performer in Perth’s retail landscape, maintaining impressively low vacancy rates. Currently, the vacancy rate stands at a mere 2.22%, representing only two vacant shop fronts along the entire strip. This low vacancy rate is a testament to the area’s strong appeal and economic resilience.
The strip’s allure extends far beyond the local residents, attracting a dynamic workforce from the surrounding areas. This diverse patronage contributes to a constant flow of foot traffic, supporting the strip’s varied retail offerings and enhancing its overall vibrancy.
The consistent occupancy levels observed over the past two years underscore the popularity as more than just a local shopping destination, but as a thriving community hub.
Investment opportunities along this strip are notably scarce, with many properties held long-term or passed down through generations. This tight market condition has created a highly competitive environment for potential investors. As a result, investment yields in this area typically sit at the lower end of the retail strip range. These lower yields reflect both the high demand for properties in this location and the perceived stability and long-term value of investments in this prime Mount Hawthorn strip.
The combination of low vacancies, diverse patronage, and strong investment interest positions Scarborough Beach Road as a prime example of a successful suburban retail strip in Perth’s evolving commercial landscape.
Retail mix
Scarborough Beach Road, along with its neighbouring retail strips, has firmly established itself as a hub for food, coffee, and entertainment. The area’s retail composition reflects this focus, with cafes occupying a significant 27.28% of the space, while pubs and bars account for an additional 8.88%. This concentration underscores the strip’s reputation as a vibrant social and culinary destination.
Interestingly, clothing retailers have a limited presence in this region. Instead, services dominate the retail landscape, representing an impressive 31.75% of all businesses. This high proportion of serviceoriented establishments contributes to the strip’s diverse appeal and regular foot traffic.
The buoyant housing market has had a noticeable impact on the retail environment. Substantial gains in local property prices have generated increased wealth for many families in the area. This is reflected in heightened consumer spending, particularly in the food and beverage category, further reinforcing the culinary focus.
The area caters to the local workforce as well as residents with a selection of other personal and recreational goods retailers, adding to the diverse shopping experience. This blend of local amenities and service offerings creates a dynamic and attractive retail environment that appeals to a wide range of consumers. Investment opportunities in this area are scarce, with properties often held long-term or passed down through generations.
Albany Highway, Vic Park & East Vic Park
Retail vacancy (sqm)
Albany Highway, one of our newest additions to the retail count and among the largest strips surveyed, spans both Victoria Park and East Victoria Park. Over the past year, this area has witnessed a slight uptick in occupancy rates. Victoria Park, in particular, has seen a strong reduction in vacancies, dropping from 6.46% to an impressive 2.28%. Meanwhile, East Victoria Park has seen an increase in vacancy levels to 10.40%. This trend has contributed to an overall vacancy rate growing to 6.58% this year, representing nine vacant shop fronts across the entire strip.
The two sections of Albany Highway present distinct retail environments. Victoria Park is characterized by larger shops and a wider streetscape. However, it faces some challenges in terms of consistent vibrancy, with many shops not operating seven days a week. This pattern affects the overall foot traffic and energy of this section.
In contrast, East Victoria Park boasts a more vibrant atmosphere. This area features a higher concentration of food-oriented businesses and smaller, more diverse shops. The enhanced streetscape in this section contributes to a livelier retail environment, attracting a steady stream of patrons throughout the week.
This dichotomy between the two sections of Albany Highway presents unique opportunities and challenges for retailers and property investors, reflecting the diverse nature of Perth’s evolving retail landscape.
Retail mix
Albany Highway’s retail landscape, spanning Victoria Park and Victoria Park East, showcases distinct characteristics in each zone. Collectively, the region is dominated by cafes and restaurants, which occupy 51.09% of tenancies, followed by services at 18.74%.
Victoria Park has a higher concentration of service-oriented businesses, accounting for 25.52% of tenancies. This includes a mix of hairdressers, barbers, real estate agencies, and chemists, reflecting a more diverse, everyday-needs focused retail environment.
In contrast, Victoria Park East leans heavily into the food and beverage sector. Cafes, restaurants, and specialty food providers collectively make up 54.43% of tenancies in this area. Additionally, pubs and bars have a stronger presence here, representing 10.40% of businesses. This concentration of food and drink establishments contributes significantly to the area’s vibrant atmosphere.
Interestingly, despite having a slightly higher vacancy rate, Victoria Park East exhibits a more lively streetscape. This enhanced vibrancy is largely attributed to its active food scene, which draws consistent foot traffic and creates a bustling ambiance throughout the day and into the evening.
South Terrace, Fremantle
Retail vacancy (sqm)
South Terrace in Fremantle, one of the smallest strips in our retail count, has shown signs of improvement despite maintaining the highest vacancy rate among surveyed areas. Over the past 12 months, vacancies have decreased, with seven empty shop fronts out of 34 total, resulting in a 20.00% vacancy rate.
The strip faced significant challenges during the pandemic, with shutdowns and restricted trade leading to multiple business closures. This impact was particularly pronounced due to the decline in tourist numbers, a crucial demographic for this location. The recovery process, including attracting new tenants, has been gradual but steady.
Recent improvements in local activity have sparked an uptick in business, signalling a potential turnaround. Unlike other surveyed strips, South Terrace boasts a diverse mix of businesses, although food establishments remain predominant. This variety contributes to its broad appeal, catering to both locals and visitors.
However, the strip still requires greater demand to further reduce vacancies and boost overall vibrancy. As tourism recovers and local patronage increases, South Terrace has the potential to regain its status as a vibrant, diverse retail destination in Fremantle.
Retail mix
South Terrace in Fremantle, renowned as a tourist hotspot, offers a diverse array of retailers that cater to both locals and visitors.
The strip has long been known for its unique character, with some businesses achieving “institutional” status after being fixtures for many years. This long-standing presence contributes significantly to the area’s distinctive appeal and helps maintain a connection to Fremantle’s rich history and culture.
However, recent challenges have impacted the strip’s vibrancy. With a vacancy rate of 20.00%, significantly higher than most other surveyed locations, South Terrace faces hurdles in maintaining its traditionally bustling atmosphere. Despite these challenges, the strip’s retail composition remains oriented towards its strengths as a dining and socializing destination.
Food and beverage establishments dominate the landscape, with cafes and restaurants accounting for 35.73% of occupied spaces. This concentration reflects the area’s continued appeal as a culinary destination. Services follow at 15.69%, providing a mix of offerings for both residents and tourists. Notably, pubs and bars make up 11.24% of the businesses, underscoring South Terrace’s role in Fremantle’s nightlife and social scene.
This retail mix, while facing challenges, still embodies the essence of Fremantle’s laid-back, culturally rich atmosphere. The high proportion of food and beverage outlets, combined with the area’s historical significance, positions South Terrace to potentially rebound as tourism and local patronage recover.
*estimate
RWC WA Ground floor, 12-14 The Esplanade, Perth WA 6000
raywhitecommercialwa.com
Brett Wilkins Director of Capital Markets 0478 611 168 brett.wilkins@raywhite.com