This article is from the Australian Property Journal archive
DESPITE lagging the country in the return-to-the-office stakes following deep pandemic lockdowns, Melbourne’s CBD has managed to post the tightest retail vacancy rate in the country.
CBRE’s Australian CBD Retail Vacancy report for the first half of 2024 found vacancies in Melbourne firmed by 50 basis points to 6.9% over the six-month period.
Sydney’s CBD recorded the largest reduction over the half, of 66 basis points to 7.4%.
Both the Perth and Adelaide markets also tightened, although to widely varying levels. One quarter of Perth CBD shops are empty, while in Adelaide the figure is just 8.8%.
The only increase in vacancy was in Brisbane, which lifted 50 basis points to 19.2% – although this is 30 basis points lower than the same period in 2023.
“We expect to see leasing growth to remain steady across 2024 as retailers continue to seek ways to showcase innovation and add value to their bricks and mortar offering,” CBRE’s head of retail property management and leasing Sheree Griff said
She said retail continues to perform well, despite cost of living pressures
“More brands are focused on quality, immersive experiences in their bricks and mortar spaces which is meeting the needs of consumers who are being more purposeful with their spending.”
CBRE’s head of retail research, Kate Bailey, said the return to office, coupled with increased tourism and international student inflows, has led to increased foot traffic in CBDs, supporting occupier appetite for floorspace within these cities.
Workers in Melbourne have been slower to return to the workplace in person since the CBD was emptied by long lockdowns during COVID, which has sparked fears that retail trade would suffer in line with the fall in foot traffic.
“Landlords across Melbourne continue to invest in existing assets which is fuelling improved performance,” CBRE director of retail leasing, Jason Orenbuch said.
“There are a number of major retail redevelopments underway and once these are completed, in 2025 and beyond, we expect tenants across the CBD will be inclined to make more proactive leasing decisions. We expect this will likely drive vacancy towards the historical average of 4%.”
Vacancy across all three retail categories – strip, shopping centre and arcade – decreased in first half 2024. The largest recorded decline in laneways and arcades of 120 basis points with a vacancy rate of 12.7%. Strip vacancies were down 10 basis points and shopping centre by 40 basis points.
A total of 5,646 CBD retail outlets were surveyed for the CBRE report. Melbourne had the highest number of retail outlets surveyed at 1,720, followed by Sydney (1,553), Brisbane (1,335), Perth (673) and Adelaide (365).
Sydney’s core CBD saw local and global brands securing flagship tenancies in strip locations, including MJ Bale at 1 Martin Place and Rodd & Gunn at 14 Martin Place.
“With the new metro opening, we expect the improved connectivity and accessibility will drive increased pedestrian traffic to new areas of the CBD which will result in a further decline in vacancy across prime and secondary retail space,” Olson said.
The increase in the Brisbane CBD’s increased vacancy can be in part attributed to the ongoing impacts of the COVID pandemic as well as upcoming refurbishments of existing centres. Strip led the increase in vacancy, softening by 105 basis points to 16.3%. A significant bifurcation remains within the CBD strip, with non-core locations recording higher vacancy compared to core locations.
While Perth’s vacancy rate is still high, it has continued to trend down and is the lowest vacancy rate recorded in the past three years, and having hit 26.5% in 2022..
The improvement in vacancy in the first half of this year was driven by CBD centres which declined by 75 basis points to 25.3% and strips which declined by 29 basis points to 23.9%. Vacancy in arcades increased slightly to 27.7%.
“Overall, the Perth retail market faces ongoing national headwinds including inflationary pressures, restrictive interest rates, and moderating economic conditions but this is counterbalanced by continuing tailwinds including WA’s nation-leading population growth, economic and tourism growth, Perth CBD’s nation-leading office occupancy rates and fiscal stimulus provided by federal and state governments,” CBRE senior director & WA head of retail Fred Clohessy said.
Adelaide CBD’s retail vacancy continued to improve, behind only Sydney and Melbourne.
CBRE director of retail, Julia Pottenger said, “Retail vacancy in the Adelaide CBD has been on a positive downtrend over the past few years driven by solid economic growth post-pandemic and strong population growth, which has buoyed the overall retail markets and supported consumer spending.”
Within the CBD centres, including Rundle Place and Myer Centre, vacancy improved by 71 basis points to 11.1%. Vacancy along the core Rundle Mall retail strip improved by 69 basis points to 8.3%.
