Over the past few years, Australia's economy has experienced resilient growth, with Western Australia (WA) standing out from other States due to its robust expansion. The State's resilient economy is further bolstered by significant infrastructure investments, including the Commonwealth Government's recent announcement to establish a dedicated multi-billion dollar defence precinct.

Despite some economic indicators softening the market, WA's economic climate remains buoyant, reveals the latest report from Colliers. Factors such as strong population growth, high retail trade, tight labour market, and a solid current and forecast State Final Demand set WA apart from other parts of the country. The growing need for skilled workers, combined with the lifestyle benefits offered by WA, continues to attract overseas and interstate migrants.

From a population growth perspective, Australia is forecast to record one of the highest rates of population growth globally over the next decade. WA currently leads the nation with the fastest-growing population, increasing by 3.1% in the year to March 2024, surpassing the national average of 2.3% and historically fast-growing Queensland. The Government's Migration Strategy aims to balance the market, with WA forecast to experience steady population growth of 1.1% per annum by 2033.

Favorable economic conditions have positively impacted the real estate market, with each asset class performing differently. Investment volumes in WA have reached $1.3billion across the office, industrial, and retail sectors in 2024 YTD. Despite higher debt costs and other macro factors affecting investment activity, Colliers' latest report revealed that WA has fared relatively well, achieving this volume. Notably, 10% of all national sales were in WA, the highest proportion of capital allocated to the State in the past decade.

In 2023, total private engineering and commercial investment spending in WA was $46 billion, a 12% increase from the previous year. Deloitte forecasts this to grow to $53 billion by 2028, with an annual growth rate of 3.1% between 2023 and 2028.

WA's geographical positioning offers significant potential for establishing strong trading and business partnerships with major Asian countries, attracting global capital. Sharing the same time zone with countries like China, Hong Kong, Singapore, Malaysia, and Indonesia, WA businesses can leverage this strategic advantage. More companies are establishing a presence in Perth, recognising the region's growing prominence.

Colliers experts broke down the outlook for various asset classes as Dean Johnston, National Director | Valuation & Advisory Services, commented, "Future demand for commercial office space will continue to be influenced by both the economic climate and technological advancements. ESG considerations are now at the forefront of discussions between owners and occupiers, driven by government and corporate initiatives.

Meeting net-zero targets remains a priority in new office designs and refurbishments, promoting sustainable building practices that reduce carbon footprints and enhance occupant wellbeing. Small to mid-size enterprises (SMEs) are currently driving demand locally, while larger occupiers continue to navigate the impacts of hybrid working. We anticipate this trend to persist in the short to medium term, with businesses likely to repurpose their existing spaces to provide quality office environments to retain and attract staff in what has been a particularly tight employment market in WA."

Richard Cash, State Chief Executive | Western Australia, added, "With high population growth, potential rate cuts on the horizon, and the introduction of Stage 3 Tax Cuts, retail spending in Perth is poised for a significant boost through 2025. The sector is set to benefit from some of the best trading conditions we've seen in years. The limited supply of retail and shopping centres is expected to enhance the performance of existing retail centres. The anticipated population growth will drive higher sales densities in these centres. Coupled with a strong local economy, we foresee new capital sources targeting the Perth retail market, increasing transactional activity in 2025."

Sam Hammond, Director | Industrial & Logistics, noted, "The outlook for the industrial and logistics sector in Western Australia continues to be robust, with leasing enquiries shifting from larger warehouse spaces to smaller warehouses, workshops & hardstand. We expect transport, logistics, mining, and manufacturing to remain active in the leasing market, with occupiers ready to take advantage of the new stock that will come to market shortly. Given owner occupiers are seeking operational efficiencies associated with prime assets, secondary backfill options are likely going to become harder to lease. Looking ahead to 2025, an additional 220,892 sqm is expected to be completed, primarily driven by supply in the East precinct. This may put upward pressure in that submarket."

Yashwini Halai, Manager | Research, said, “The overall outlook for the national economy has been downgraded as uncertainty lingers due to geopolitical situations, a slowing global economy, labor shortages and commodity prices stabilising. However, the WA economy remains buoyant as it grows its scale of economy and will be a key driver for opportunities in the real estate market. Whilst there are current challenges present across each asset class, there are also many opportunities and room for significant growth and prosperity. Strong population growth, significant infrastructure investment in the State, economic diversification and growing partnerships are just some of the many promising factors that will drive the economic growth of WA in the coming years.”

To find the full report Colliers | AU | WA Research Report | The Engine Room of Growth

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