This article is from the Australian Property Journal archive
Following a slow recovery post covid, CBD retail is bouncing back strongly with a notable tightening in vacancy rates over the past six months, driven by increased foot traffic, returning office workers, and a resurgence in tourism and luxury brands.
According to CBRE’s Australian CBD Retail Vacancy H2 2024 report, the national retail vacancy rate decreased by 80 basis points (bp) to 11.3%, marking the lowest level since the research series began in H1 2021.
The report, which surveyed 5,665 retail outlets across five capital cities, saw Melbourne emerge as the standout performer, maintaining the lowest vacancy rate in the country at 6.0%, down 85bp from H1 2024.
Sydney’s vacancy tightened by 29bp to 7.1%, while Brisbane and Adelaide also saw improvements, with vacancy rates declining to 18.5% (-68bp) and 7.7% (-105bp), respectively.
However Perth, despite recording the largest reduction in vacancy (285bp), still holds the highest vacancy rate at 22.2%.
Kate Bailey, CBRE’s head of retail research, attributed the tightening vacancy rates to a combination of factors, including the return of office workers, increased tourism, and a surge in international student numbers.
“The increase in workers returning to the office, coupled with rising tourism and international student inflows, has led to more foot traffic in CBDs, fuelling occupier appetite for floor space,” she said.
Sydney: Luxury brands boost CBD
Sydney’s CBD retail vacancy tightened for the third consecutive half-year, dropping 29bp to 7.1% in H2 2024. The retail scene was bolstered by the arrival of high-profile luxury brands and new food and beverage (F&B) tenants.
Sam Embling, CBRE’s director of retail occupier, noted that core strip locations remain in high demand as retailers seek to enhance brand awareness and drive sales.
Arcade retail vacancy saw the largest decline, dropping 76bp to 6.9%, with the Strand Arcade achieving full occupancy (0.0% vacancy) for the first time. Strip retail vacancy also tightened by 57bp to 7.6%, with global brands such as Saint Laurent and Christian Louboutin securing flagship tenancies at Westfield Sydney.
Looking ahead, Sydney’s retail vacancy is expected to decline further, supported by record-high population growth and the ongoing expansion of the transformative Sydney Metro project.
Melbourne: revitalisation pay off
Melbourne’s CBD retail vacancy tightened by 85bp to 6.0% in H2 2024, marking the third consecutive half-yearly decline. Arcades and retail centres saw significant improvements, with vacancy rates dropping to 10.1% (-250bp) and 2.8% (-127bp), respectively. However, strip retail locations experienced a slight increase in vacancy, up 30bp to 7.2%.
Jason Orenbuch, CBRE’s director of retail leasing, said the role of landlord investments in driving positive outcomes.
“We’re continuing to see landlords actively invest in their existing assets, which is expected to deliver positive outcomes as significant retail development projects near completion later this year,” he added.
F&B and fashion retailers continue to dominate the scene, accounting for approximately 52% of surveyed areas in H2 2024. With several major retail projects set for completion in 2025, vacancy rates are expected to tighten further as tenants become more proactive in their leasing decisions.
Brisbane: Major projects drive visitation
Brisbane’s CBD retail vacancy decreased by 68bp to 18.5% in H2 2024, driven by increased tenant demand for flagship stores in prime locations and a gradual return to office workers. Strip vacancy tightened by 217bp to 14.0%, while arcade vacancy improved by 357bp to 28.3%.
Andrew Woodgate, CBRE’s senior director of retail leasing, said major infrastructure projects, such as the Kangaroo Point Bridge and Queens Wharf, are driving increased visitation.
“We expect to see this momentum continue in the medium to long term, with major redevelopments like the new Albert Street train station and Waterfront Brisbane set to revitalize key areas of the CBD,” he said.
Perth: Luxury retailers transform the CBD
Perth’s CBD retail vacancy improved significantly, tightening by 285bp to 22.2% in H2 2024.
The west coast city was bolstered by the arrival of luxury brands, including Gucci, Omega, Cartier, and Longines, which have opened new stores in the Murray Street Mall precinct.
Fred Clohessy, CBRE’s senior director and WA head of retail, highlighted the role of strong population growth and economic performance in driving retail activity.
“Perth’s CBD retail sector continues to strengthen, with luxury retailers opening new stores amid continued consumer demand for high-end products,” he said.
Adelaide: Steady growth supports retail recovery
Adelaide’s CBD retail vacancy improved by 105bp to 7.7% in H2 2024, the third-lowest vacancy rate in the country. The decline was driven by tightening across Rundle Mall, where vacancy improved by 400bp to 4.3%, supported by new store openings from apparel operators and luxury watch retailer The Hour Glass.
Julia Pottenger, CBRE’s director of retail, said steady economic and population growth, coupled with strong office occupancy, continues to support the market.
“Adelaide CBD has strong visitation trends, which are driving positive outcomes for retailers,” she said.