This article is from the Australian Property Journal archive
MELBOURNE still holds the lowest CBD retail vacancy in the country as rates tighten across the Australia’s major city markets.
According to CBRE’s latest Australian CBD Retail Vacancy H2 2023 report, the national CBD retail rate hit 12.7% over the period.
“Overall, vacancy has tightened nationally. The return to office, coupled with increased tourism and international student inflows, has led to more foot traffic in CBDs, supporting occupier appetite for floorspace within these markets,” said Amita Mehra, head of retail research at CBRE.
Melbourne’s vacancy rate is the lowest in the country at 7.37% and also saw the largest vacancy reduction over the period, dropping 330bps.
“Significant bifurcation is evident in both categories, with non-core locations exhibiting significantly higher vacancy than core locations,” said Jason Orenbuch, director of retail leasing at CBRE.
“While overall vacancy has declined over the period, tenant preference for vacant space appears to be concentrated in limited locations.”
The Sydney CBD also recorded a decline, dropping 275bps, resulting in an 8.1% vacancy.
“Sydney is viewed as a very good place for international brands to do business, given Australia’s strong and safe economy and consumer spending power,” said Leif Olson, Australian head of retail leasing at CBRE.
“Retailers are focusing on their connection to consumers, which has resulted in bigger, curated experience stores – a trend we’re seeing across the globe.”
Brisbane and Perth each saw a marginal tightening over the period to hold vacancy rates of 18.7% and 25.3%% respectively.
Over the December quarter, the CPI fell from 6% to 4.1% and discretionary spending levels have remained relatively steady.
The report also estimates discretionary spending should grow in H2 2023 if interest rate cuts begin.
In 2023, total retail sales nationally neared $425 billion up 60% compared to a decade earlier, when $259 billion was spent in 2013.
“Bricks and mortar spaces remain highly desirable to retailers in ensuring their brands are vibrant and have a purposeful vibe that fosters a culture of innovation, as evidenced by the current flight to quality trend,” Sheree Griff, head of retail property management and leasing at CBRE.
“Retail sales growth is attributed to consumers seeking to look good and feel good, with the strongest sales being reported in the wellness sector, cafes and restaurants. Our view for 2024 is that leasing growth will occur across all markets as retailers partner with landlords to evolve and meet the live, work, and play needs of consumers.”
