What is the aftermath of Covid on Perth’s Retail market?

The aftermath of Covid-19 on Perth's Retail market has been profound. The pandemic, which commenced in early 2020, constituted one of the most significant global shocks in recent memory. The three facets of commercial real estate—office, industrial, and retail—were severely impacted worldwide, with lockdowns rendering offices and shops reminiscent of a post-apocalyptic landscape.

As several years have transpired since the onset of the pandemic, an assessment of the current landscape is pertinent. The national retail sector is displaying signs of returning to a semblance of normality. The average monthly business turnover, which rested at 2.5-3% before Covid, experienced a notable spike in April 2021, reaching 24.6%. This surge implies that, at the peak, the average business was liquidating a quarter of its inventory within a single month. Fast forward to June 2023, and retail spending has stabilized, approaching levels observed pre-Covid. However, the ascent of interest rates is proving effective in tempering retail expenditure, and the potential for a further decline or negative trend in monthly turnover looms large due to constrictions in credit and dwindling savings.

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The national total retail turnover reflects a growth from approximately 28 billion to 35 billion per month, constituting a 22% increase. While some of this escalation can be attributed to an elevated Consumer Price Index (CPI), it undeniably represents a substantial surge within a relatively brief timeframe.

Turning attention to the Western Australian Retail Market, a distinctive trend emerges. Despite a contraction in spending across most states, Western Australian sales have surged by 5.4% from a year ago, constituting the most rapid pace of growth among all states. This persistence in demand has translated into positive monthly turnover, distinguishing Western Australia from the declining trajectories witnessed in New South Wales (NSW), Victoria (VIC), Queensland (QLD), South Australia (SA), and the Australian Capital Territory (ACT).

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Examining Western Australia in isolation reveals a consistent retail turnover, surging by approximately 25% since 2019, thereby outperforming national spending by 3%. Notably, the local Perth economy has surpassed the broader Western Australian state, recording an increased Gross Regional Product (GRP) of 7.6% compared to 3.2%, indicative of a robust retail spending environment.

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In the context of this consistent growth, the Western Australian retail expenditure assumes a less volatile disposition compared to the national average. While poised to align with overarching national trends, the anticipation is for subdued volatility. As a consequence of the deceleration in spending, retailers are envisaged to exercise caution in undertaking substantial inventory acquisitions, resulting in a diminished stock turnover.