- Perth has all the right ingredients for newcomers to call the city home.
- A challenging labour market could be holding Western Australia back from reaching its full potential, growth-wise.
- Office markets continue to show signs of improvement.
The Perth commercial property market is performing well, but population growth could be the linchpin that further strengthens the sector, according to Knight Frank’s managing director of WA, Jeremy Robotham.
“Once the population in Western Australia starts to really grow, each of the real estate sectors will strengthen further,” said Robotham.
He said that Western Australia is fertile ground for population growth, pointing out affordability and employment opportunities among the drawcards.
“Although the residential rental market is very tight, residential capital values can only be described as extremely affordable compared to almost every other major market across the country,” said Robotham.
“Given employment opportunities are also both plentiful and varied, if these two factors can be translated into consistent population growth, all of the commercial property sectors in Perth should also see sound and sustainable growth in performance.”
Australia’s population growth 2021 to 2022
“It was expected that the end of China’s lockdowns at the start of this year would be a boon for West Australian real estate markets, and while that hasn’t fully come to fruition, there are many positives for Perth including the strength of the economy,” added Robotham.
A challenging labour market
“Most economic cylinders are firing,” according to Robotham, with the resources sector, international education, tourism, and agricultural sectors all putting in strong performances.
One issue putting Perth on the back foot, however, is the lack of people power.
“The scarce labour market is one factor holding Western Australia back from reaching its full potential growth-wise.
Jeremy Robotham, Knight Frank
Head of research at Ray White, Vanessa Rader, also noted that the labour market is holding WA back from population and commercial sector growth, to an extent, adding that larger corporates are now seeking a WA presence; however, the state remains behind the eastern seaboard for sectors such as finance, business, and tourism.
Office sector remains robust
Industrial real estate remains a standout in Perth, with the office sector also seeing improvement.
The recently released Property Council (PCA) Office Market Report recorded a vacancy rate of 15.9% for Perth. This result is practically unchanged from January this year despite over 67,000 square metres (sqm) of office space entering the market over the past six months.
West Perth also recorded a strong result, with vacancies reducing to 11.1%.
Movement in office vacancies between January 2022 and 2023
“Effective rental growth along with net absorption will continue to be positive, but the rate of growth will be dictated by white collar employment growth,” said Robotham.