Colliers research is optimistic about Perth's commercial property market in 2025, but housing still an issue

Perth has this year garnered the highest share of national commercial property transactions in a decade as the west continues its run as the country’s economic powerhouse. New research by commercial real estate agency Colliers shows WA has fared “relatively well” against a backdrop of higher interest rates, with $1.3 billion spent on office, industrial and retail sector properties. But the true strength of the economy is evident in its growing share of transactions compared with east coast markets, with WA accounting for nearly 10 per cent of all commercial properties purchased in Australia this year. This is the highest proportion of capital allocated to WA in the past 10 years with the historical average being around 5-6 per cent, the report said. “Of the total transactions in WA, the retail and industrial sectors have dominated the market over the past couple of years.” Research manager Yashwini Halai said the national economic outlook had been downgraded amid geopolitical issues, a slowing global economy, labour shortages and stabilising commodity prices. But WA would remain buoyant, fuelled by strong population growth and significant infrastructure investment. The report anticipated a near to short-term stabilisation in office vacancy, which has tightened from 19.9 per cent in January 2021 to 15.5 per cent in July this year. It is confident the City of Perth’s Business Relocation Grant will attract more operators to the CBD. Population growth is expected to boost the demand for retail, leading to rental growth. Colliers chief executive Richard Cash said the retail sector was facing “some of the best trading conditions ... seen in years”. “With high population growth, potential rate cuts on the horizon and the introduction of stage three tax cuts, retail spending in Perth is poised for a significant boost through 2025,” he said. Industrial sales are expected to remain robust after this year hitting $160 million, which is an improvement from last year but below the ten-year average. The $7.2b investment in Wesport and the expanding Perth Airport precinct are expected to boost the logistics market. Colliers’ Sam Hammond expects the market to remain robust next year, with transport, logistics, mining, and manufacturing to remain active. However, secondary backfill options will become harder to lease. Mr Hammond said supply would get a boost with an extra 220,892sqm added to the market in 2025. But the report anticipates the housing crisis is set to continue. “The decline in commencements paired with increasing population doesn’t comfort the existing housing crisis,” said the report. “Due to elevated construction costs and labour shortages, several local builders have also entered administration over the past 12 months — again adding another layer to the complex conundrum. “The risk of other builders defaulting over the next 12 months remains elevated and a key concern; and we understand the major financial institutions are monitoring the situation closely.”