Fundamentals Strong in West but Challenges Remain

Article by Renee McKeown | The Urban Developer

Strong fundamentals and rising demand has Perth in a good place, but developing in Australia’s most isolated capital city is not without its problems.

Housing growth year-on-year is up 25.3 per cent, land supply is at its lowest level in 18 years and industrial vacancies are the tightest in the world.

And, among supersized projects on the cards, there’s a $5-billion airport redevelopment plan signed between Qantas and Perth Airport.

Yet, with high construction costs, labour shortages and shifting regulations the road to reshaping Perth is anything but straightforward.

Three developers working in Perth’s inner-city, suburbs and beaches spoke to The Urban  Developer about what’s hot and what’s not—and what they are doing to make the best of the west.

Hesperia has this year completed one of the biggest mixed-use projects outside the Perth CBD. Its healthcare director Ian Smyth says it can be challenging.

“We need not more builders but sub-contractors, and we’re not just fighting the likes of mining, we’re also fighting the likes of Queensland for subcontractors,” Smyth says.

“That’s something we’re hoping the local government or WA Government is trying to solve.”

Hesperia completed Murdoch Square this year. It comprises five buildings including a plaza, Marriott hotel, aged-care facility, medical suites, the state’s first medi-hotel, offices and a  private hospital.

“Murdoch Square was born out of an expressions-of-interest released [in 2016] by LandCorp, now known as DevelopmentWA, the state government land development authority,” Smyth says.

“Murdoch Square for us has great thematics … it’s 12 to 13km south of the CBD at a train  station.

“It is the second busiest train station outside the Perth CBD with 9000 boardings a day, and there’s a primary freeway nearby that services the CBD.”

The developer is optimistic about long tailwinds for industrial, health and residential in Western Australia, according to Smyth.

“We are bringing forward land releases, forging ahead with forward works and we position our masterfield communities … as brownfield as opposed to greenfield along the north-south corridor,” Smyth says.

“In WA we released a lot of land along the coast to the north and south, and what that means is people can buy mixed-use apartment sites along the coast and sell attractive propositions to investors or occupiers.

“But anything off that coast, infield or away from the CBD or the river is really challenging because the underlying land cost, is a bit lower but not by and lot, and the construction costs are relatively the same.”

In Perth’s third most expensive suburb, Cottesloe, apartments are fetching a median of $981,700 and houses $3.5 million. It is why developer-architect Baltinas has two projects on sites overlooking the Indian Ocean on the go.

Baltinas managing director Barry Baltinas says they will hit the ground running next month.

“In these two instances we are developing arguably two of Perth’s best Cottesloe waterfront projects in an extremely rare and highly sought after location,” Baltinas says.

“It’s going very well, however, it’s been delayed waiting on Western Power to move high voltage underground power lines [expected to finish in November] which are encroaching into our boundary line.”

The projects at 120 and 122 Marine Parade are Cott, a 12-storey, eight apartment tower that will replace the Ocean Beach Hotel, and the Meridian, an eight-storey, 10-apartment luxury block.

“We are introducing an organic building form inspired by Cottesloe’s natural environment,” Baltinas says.

“We will be using large format 3D-printing technology to print the organic formwork to support the off-form concrete, something that has never, to our knowledge, been done in Perth.”

Baltinas says that at times the state design review had been challenging for many developers. That included Grange Development’s C6 development to create a carbon-negative, $350-million hybrid timber tower.

For now Cottesloe is the main focus for the developer-architect, who has looked at inner-city sites in the past.

“These locations are also very tightly held meaning that there was limited opportunity for other development sites to come available,” Baltinas says.

Among those focussing on that part of the city is Willing Property, as founding director Tim Willing explained.

“We pretty much only develop in Mt Lawley and that inner-east and north-eastern corridor,” Willing says.

As is the case with a growing number of developers, about two years ago Willing Property moved into the builder-developer space.

“We felt there was a better way of doing things, we had a couple of builders fold on us and by necessity we had to finish a project ourselves,” Willing says.

“That gave us the confidence to effectively take the leap and become a builder.

“We’ve got a particularly high bar around quality and we build only in brick and as such I’d say we’re the only builder in Perth and developer who directly employs our subcontractors, our bricklayers.”

This includes Willing Property’s West Residences at Mt Lawley, an eight-storey flatiron building comprising 29 apartments. It is on track to be complete in early 2026.

As is the case in most part of the county, the West has its shares of positive and minuses. But the fundamentals of the home of the most millionaires per capita in the world, according to Henley & Partners, remain strong, and the opportunities are stacking up.