Ongoing branch closures by major banks are having a material impact on the shape of our CBD retail landscape, especially in Sydney.

At least that’s a key finding within CBRE’s latest research which highlights 1308 closures across Australia’s major cities between 2017 and 2023 – representing around 39% contraction, including the closure of 424 branches this year.

According to CBRE’s head of retail research Amita Mehra, a refocus on larger and more centrally located branches by many of the larger Australian banks has resulted in the leasing of flagship style floorspace on Sydney’s major shopping strips to some unlikely new players.

Capitalising on shifting shopping and demographic trends, CBRE data suggests that the beauty industry [cosmetics] and bubble tea stores have been quick to snap up highly sought-after city floorspace the banks no longer need.

Mecca pilgrims

Having recorded steady growth over the past decade, the cosmetics segment, according to CBRE data is expected to reach $5.9bn by FY28.

Despite the success of online shopping, Mehra notes ‘experiential’ bricks-and-mortar stores within high-foot traffic areas are part of omni-channel strategies that some major beauty brands are now trialling.

She cites Melbourne-based multi-brand retailer, Mecca which is planning to open an additional 108 stores across Australia and NZ over the next three years. It’s understood Mecca’s Sydney outlet is the largest beauty store in the southern hemisphere and this year it plans to open an even larger one in Melbourne.

Underscoring the in-store experience [over online shopping] adds Mehra, half of all shoppers want to test and colour-match products in physical stores before buying.

Interestingly, while Mecca is the largest player in the industry with 16% market share, the cosmetics retailer only represents 6% of online [cosmetics] sales.

While brand aggregators have provided shoppers with an opportunity to get an overall experience on a larger scale, CBRE’s head of retail leasing Australia Leif Olson believes individual enterprises want to control the customer experience by opening standalone stores.

Frothy tea market

CBRE’s latest research attributes much of the growth in Sydney’s bubble tea market to the return of international students and the city’s rapidly growing population.

Sydney’s CBD has 36 bubble tea stores, with 83% belonging to franchises and 17% being independent stores.

The concentration of bubble tea enterprises consists of 53% in shopping centres, 33% in strip retail, and 14% in arcades.

Olson believes Sydney’s CBD foot traffic, and a trend-setting youth consumer base, bodes well for further bubble tea expansion by both franchises and independents entering this growing market.

“Sydney is forecast to add 1.02 million residents by 2032, largely driven by migration from East Asian countries where bubble tea is highly popular,” Olson said.

“The high level of leasing enquiry from bubble tea brands proves that the category has not reached market saturation, with significant room for further expansion.”

Image: Bubble tea shops are replacing bank branches in CBD locations