An article last Friday in Fairfax papers tells the story of post pandemic Melbourne and Perth. Essentially, it states that whilst Perth has nation leading office occupancy in its CBD, the retail vacancy in the CBD is 26.1 per cent – the highest CBD vacancy rate in the country. Meanwhile, in Melbourne, the opposite is true, with a retail vacancy rate of 9.2 per cent, but a very high office occupancy rate.
As anyone who runs a business or lives in the Perth CBD knows, the decline of retail in the Perth CBD has been going on for years. As this article from 2017 states, the vacancy rate back then was only 16 per cent, with a Property Council WA spruiker claiming the vacancy rate had peaked back in 2017.
When Jogia Diamonds first moved into our showroom in King Street, in early 2019, it was billed as “hot” tourist destination and Perth’s home of luxury brands, with Tiffany & Co, Louis Vuitton, Prada, Gucci and Chanel all calling King Street home. Whilst there were one or two vacancies, the street was very much alive, with international brands filling the southern end and independent boutique retail in the northern end.
However, beginning 2019, shops began to either move out of King Street or close down completely. Tiffany and Louis Vuitton were bribed by Charter Hall to move to nearby Raine Square. Others such as Prada closed down, presumably due to the lack of international tourists. Fast forward to today, and King Street has a sort of moribund feel to it, with a street level vacancy rate of at least 50 per cent.
Walking down King Street this evening after attending the fantastic Winter Lights launch from Brookfield.
What a sad street!
Vacancy rate around triple Perth’s retail average!#perth #wanews pic.twitter.com/RaXYQXoMD4
— Brent Fleeton (@BrentFleeton) August 24, 2022
Above: A Perth City councillor’s view of King Street
The King Street Precinct
Whilst empty shops are nothing new and plague many urban areas in Australia, King Street did have its own marketing company – The King Street Precinct. Again, this is nothing new, and many commercial and retail areas have their own marketing companies or ad-hoc organisations, set up by property owners or sometimes the local council. Usually these take the form of a website and/or various social media pages, and sometimes even events to promote the district.
However, in April, the marketing company itself – King St Precinct Pty Ltd, which was run by King Street’s biggest property owner, collapsed into administration, owing tens of thousands of dollars to a consulting firm. When I first heard about this, I thought it was a bit strange, by a quick search on ASIC, revealed that it is in fact true – thus making King Street Australia’s first bankrupt street!
Landlords’ Dreams
One thing that commercial landlords in Perth are not short of is optimism, with landlords and agents regularly touting the prospects in the city.
In a recent Property Council spruik fest, CBD retail property owner and wannabe developer, Randal Humich stated:
“We need this vision to say the Hay Street Mall, is it going to be a food and retail precinct, are we going to have more cafes”
Having grandiose visions of how they are going to rent out their properties is fairly common amongst Perth CBD landlords. One landlord I speak to regularly always mentions how she thinks there needs to be more cafes and restaurants in the CBD, more jewellers on King Street or how the Perth City Council is somehow to blame for the current retail vacancy rate. Whilst having these visions is all very well and good, it certainly does nothing to solve the retail vacancy rate in the CBD.
No, King Street will never be like this.
The Great Divide
One of problems facing retail property in Perth is that there are so many individual landlords, unlike larger cities such as Sydney or Melbourne where retail property is held by a handful of large landlords. This obviously creates the problem where each landlord is looking after their own interests, but in Perth a very distinct divide is appearing between more progressive landlords – that is the landlords who actually want to lease their premises, and on the other side, lazy landlords who think they can lease their premises by just putting up a for lease sign and charging the same rent as they were charging five years ago. This divide is most visible when comparing the Murray Street, where landlords were able to lure international brands such as Dior, Cartier and Fendi, whilst around the corner in King Street, half the shops sit empty.
Whilst it’s easy for most people to say that the solution is to lower the rent to attract new tenants, it’s clear the real cancer are the “lazy landlords” who put little to no effort into leasing their shops. Suggestions bandied around such as a vacant property tax will do little to nothing to fix the problem as many landlords are using their properties as collateral for other loans, hence thousand or two dollars a year will make no difference.
The good news for King Street is that in the past six months, more shops are being filled than being vacated, which will hopefully lead to a revival in one of Perth’s most famous streets.
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