A new economic forecast suggests Western Australia's commanding economic lead over other Australian states is set to narrow in the coming decade. However, the state's commercial property market, particularly industrial assets, is expected to remain exceptionally strong due to emerging sectors and severe supply constraints.
Shifting Economic Foundations
The report, authored by JLL director Ronak Bhimjiani, indicates that demand for WA's traditional resources, which currently account for 47 per cent of the state's economy, will moderate compared to the robust post-pandemic period up to 2024. While WA is projected to remain a top-three global producer of iron ore, lithium, gold, and rare earths for the next few years, a plateau in demand is already evident.
Mr Bhimjiani notes that growing iron ore demand from India, the world's fastest-growing economy, will not be sufficient to replace the falling market share of China, which currently consumes half of all global steel. "Looking ahead, the next phase of economic growth will be defined by capturing opportunities in emerging sectors including defence, critical minerals, and value-add processing," the report states.
Commercial Property Defies the Trend
Despite the forecast moderation in traditional resources, intense pressure on the commercial property market is set to continue. The industrial sector is a standout, with a vacancy rate of just 2 per cent. This tight market will be further squeezed by the AUKUS security pact.
Defence-related occupied space as a percentage of the overall industrial sector is forecast to nearly double, growing from 4.9 per cent in 2025 to 9.1 per cent by 2034. Robust activity in transport, postal and warehousing, manufacturing, and wholesale trade will maintain broader demand.
Office and Retail Outlook
The outlook for Perth's CBD office market hinges on a critical factor: a constrained supply pipeline with no new completions expected until at least 2030. This creates a clear path for vacancy rates to fall from the current 17.1 per cent. Under a base-case scenario of stable demand, the vacancy rate could decline to a range of 11 to 13 per cent. Another resources boom, deemed unlikely but possible, could push vacancies below 8 per cent.
WA's ongoing wealth positions its retail sector for strong medium-term performance. This is driven by strong population growth, low unemployment, high wages, and a "wealth effect" from increased housing equity.
Employment Shifts on the Horizon
The report also forecasts shifts in the state's employment landscape over the next ten years. While the proportion of white-collar jobs in mining will remain stable, healthcare and social assistance employment is set to grow. In contrast, job numbers in financial services and insurance are expected to shrink slightly.
In summary, while WA's economic engine may cool slightly compared to its recent breakneck pace, its commercial property market is built on diverse and solid foundations, ensuring it remains a powerhouse for investors and businesses alike.
