At Sterling Property, we are committed to staying ahead of the curve with the latest trends and opportunities in the commercial property market. Recently, the company’s entire staff group undertook a masterclass in AI programs, run by Pathfindr.ai, where we explored the potential of AI to gain deeper market insights. Led by Principal Partner, Brian Neo, we turned to ChatGPT 4.0 to gather fresh perspectives on Perth’s fringe commercial property market. Here’s what we discovered.

Market Overview: A Changing Landscape

Perth’s fringe suburbs, including popular areas like Subiaco, West Perth, East Perth, Leederville, and Victoria Park, have become increasingly attractive for businesses seeking affordable, well-connected office and retail spaces outside the CBD. These suburbs offer flexibility and proximity to the city while keeping costs manageable.

Key factors driving this trend include:

• Affordable rents compared to the CBD.
• Community-oriented environments that appeal to SMEs, tech startups, and professional services.
• Lower vacancy rates due to the limited supply of high-quality, modern office spaces.

Key Market Trends by Sector

Industrial Sector Leading the Way

The industrial sector has emerged as the top performer in Perth’s fringe market in 2024, driven by several key factors:

• High demand for larger industrial lots amid a scarcity of developed land, pushing up prices.
• Sales activity surpassing pre-COVID levels, with prices rising by 13.3% year-over-year to $2,353 per square meter.
• Strong demand from owner-occupiers, particularly in secondary locations.

Office Market Showing Resilience

Though not growing as fast as industrial, the office sector is holding strong:

• Perth CBD vacancy rates have fallen from 15.9% to 14.9%, their lowest since 2015.
• West Perth has improved for five consecutive periods, with vacancy rates dropping to 11.1%.
• Refurbished and innovative office spaces are driving demand, with stable rents and increased activity levels.

Retail Sector: Facing Challenges but Opportunities Remain

The retail market in Perth’s fringe suburbs is more volatile but still presents opportunities:

• Consumer sentiment, shaped by rising house prices, has boosted spending, while higher interest rates temper discretionary income.
• Deloitte forecasts WA will see the strongest retail sales growth in Australia in the coming years.
• Retailers face competition from online stores, but strong consumer activity in certain areas offers a positive outlook.

Investment Opportunities in Perth’s Fringe Suburbs

Fringe suburbs are increasingly attracting investors seeking attractive yields and capital growth. Notable opportunities exist in:

• Industrial development: High demand for larger lots presents substantial potential.
• Office refurbishments: Upgrading older spaces to meet modern workspace needs could offer significant returns.
• Mixed-use developments: Combining retail, office, and residential elements can cater to evolving demands.
• Adaptive reuse: Repurposing underperforming spaces offers a cost-effective way to unlock value.

Development and Revitalisation

Several fringe suburbs, including Subiaco and West Perth, are undergoing revitalisation with new developments and infrastructure upgrades, transforming these areas into vibrant business hubs. Adaptive reuse of older office buildings into co-working hubs or modern office spaces helps meet demand while maintaining supply levels.

Broader Economic Impact on the Fringe Market

Perth’s fringe commercial property market has benefitted from Western Australia’s strong economic fundamentals, particularly in the mining and resources sectors. While rising interest rates and inflation may impact future investment, Perth’s relatively affordable property prices continue to attract interest from investors.

What Our Principal Partner Brian Neo Thinks

“Unlike the East Coast of Australia, Perth enjoys the highest office occupancy rate in the nation. Our fringe office markets, such as Subiaco and West Perth, have been less impacted by the work-from-home policies that took hold during the COVID-19 pandemic.

We’re seeing a growing trend of businesses moving back to office-based operations, particularly in dynamic areas like Subiaco and West Perth, where strong accessibility and a collaborative environment make them highly attractive.

High-quality tenants and redevelopment potential make these suburbs excellent prospects for long-term growth. On the role of technology in understanding the market, Neo adds: “AI gives us a broad view of global market shifts, but nothing replaces the local insights we gather from engaging directly with investors and tenants. Perth’s market operates differently from the East Coast, and our experience allows us to pinpoint the key drivers of growth and opportunities more accurately.”

By working together and sharing insights, we can provide even more value to our clients and contribute to the overall growth of Perth’s commercial property market. Collaboration between agencies would strengthen the sector as a whole and help ensure that Perth remains a competitive and innovative market for years to come.”

Conclusion: Opportunities Abound in Perth’s Fringe Suburbs

By turning to AI, we’ve identified clear opportunities in Perth’s fringe commercial property market. From industrial development to mixed-use projects, these areas are primed for growth. With ongoing revitalisation efforts and a solid economic foundation, fringe suburbs offer exciting prospects for investors and businesses alike. At Sterling Property, we remain committed to leveraging both cutting-edge technology and local expertise to help our clients capitalise on this dynamic market.