As we look ahead to 2025, I am seeing several emerging trends that may significantly impact the commercial real estate landscape in Western Australia. While not predictions, these insights are informed by current data and on-the-ground observations.
1. Moderation of Construction Costs
Construction costs are stabilising, with annual growth hovering between 2–4% (according to Cordells and Rawlinsons), a marked improvement from the double-digit increases of recent years. Several factors could also exert downward pressure into 2025:
Metronet Project Completions: As major infrastructure projects conclude, labor resources will re-enter the market.
Incentives for Workforce Expansion: Government programs, such as the $10,000 relocation incentive for tradies, are set to increase labor availability.
Softening Mining Demand: Stabilised iron ore prices and reduced mining sector hiring could redirect labor towards construction.
This construction cost stabilisation is crucial for improving development feasibility across Perth and the southwest, laying the groundwork for new projects.
2. Renewed Activity in Apartment Development
The apartment sector is poised for growth as rising apartment prices and stable construction costs improve project viability. Over 10,000 approved apartments remain unbuilt around WA, primarily due to cost-revenue imbalances. As feasibility improves, projects in B and C grade areas may finally break ground, as they are approved and well-positioned to capitalise on more favourable prices and costs.
A key challenge will be securing sufficient builders to deliver these projects. However, some small to mid-tier construction groups are stepping up to fill the gap, positioning themselves as the next generation of builders in the market. Despite this progress, effectively organising and scaling the additional labor force will remain a hurdle.
This shift could unlock much-needed apartment supply, especially in second tier locations that have been constrained by cost pressures.
3. Improved Feasibility for Commercial Developments
The outlook for commercial developments is also brightening. A potential reduction in interest rates could improve terminal values for developers, making projects more financially viable. Stable construction costs, paired with WA’s growing population, could spur investment in sectors like retail, childcare, and medical facilities, where demand has been steadily rising but supply has lagged.
While challenges remain, the combination of stabilising costs, growing demand for housing, and a favourable interest rate environment could catalyse significant activity in WA’s commercial real estate market. For developers, investors, and property owners, the year ahead may offer a rare alignment of opportunities.
As Andrew Forrest recently put it: “Build, baby, build.”
