Sydney led the CBD retail recovery during the first half of the year, however the recovery in other CBDs was less clear with the national vacancy rate increasing 350 basis points to 17.4%.
According to CBRE, the Sydney CBD vacancy declined 70 bps to 6.9% in H1 2022, with the opportunistic expansion of premium and luxury retailers helping to drive demand.
Melbourne had the next lowest vacancy rate at 15.9%, followed by Adelaide at 18%, Brisbane at 18.9%, and Perth at 28.4%.
CBRE’s Australia Head of Retail Leasing Leif Olson said they had seen a slight increase in overall vacancy during the half across Australia.
“However, as the return to the office gathers pace in the coming months, we expect to see more retailer mandates for prime mall locations across the country,” Olson said.
“The biggest improvements are being recorded for prime stock, with vacancy rates continuing to increase in secondary, non-core locations.”
Olson said that some new store openings had been delayed by staffing issues and access to fitout materials, pushing occupancy dates back to H2 2022 / H1 2023.
CBRE surveyed 4,834 CBD retail outlets, with Melbourne having 1,832 stores due to its large CBD retail core, followed by Sydney with 1,082 stores. Brisbane had 912 stores, Perth had 659 stores and Adelaide had 353 stores.
“The stubborn levels of vacancy recorded in H1 are due to the lagging effects of the pandemic and the fact that some retailers are not renewing leases,” CBRE Research Director Kate Bailey said.
“However, we expect to see the market stabilise over next six to 12 months as retailers reset their strategies and capitalise on an increase in leasing options.
“Vacancy levels in prime areas are expected to recover faster than secondary areas, amid an ongoing flight to quality.”
Sydney CBD retail
In Sydney, Olson said that a return to the office and the long-term value that retailers were identifying in high street flagships was helping to drive down the CBD vacancy rate.
Prime stock, which included retail space on Martin Place, George, Pitt, King and Market Streets, was the most sought after with secondary locations suffering higher vacancies.
“Hospitality venues are performing well, with most quality restaurants performing above historic levels, but have had problems with staffing as well as balancing workers’ return to the city,” Olson said.
“Mature hospitality businesses are looking at expansion with new concepts opening, such as Efendy on Carrington Street, two new concepts opening at 50 Pitt Street and another two opening at 570 George Street, in addition to Applejack Hospitality opening in the North Sydney CBD.
“We’ve also seen strong demand from luxury brands, as well as footwear groups, looking to secure long-term leases for flagship stores in the city.”
Melbourne CBD retail
In Melbourne, CBRE found that enquiry from entertainment and food and beverage retailers had experienced a resurgence despite the lagging effects of last year’s lockdowns hitting clothing and soft goods retailers particularly hard.
CBRE Associate Director, Retail Leasing, Jason Orenbuch said that demand for high end hospitality venues across the Melbourne CBD was also on the rise, particularly in well-established culinary locations.
“More broadly, enquiry for retail flagship locations in super prime locations also rose during Q2,” Orenbuch said.
He said requirements for partially or fully fitted retail spaces were in demand, particularly in the hospitality sector.
Brisbane CBD retail
Brisbane’s CBD recovery was delayed in H1 as the Omicron wave and flooding challenged businesses, while both the Federal and State governments wound back business support payments.
CBRE found that small-to-medium clothing and soft good retailers were hardest hit as localised spending and online retail sales surged, however the CBD was beginning to see an up-tick in workers, students and tourism.
CBRE Associate Director, Retail Leasing, Tanaka Jabangwe said prime locations were experiencing healthy demand from tier 1 retailers seeking flagship store locations and hospitality enquiry was surging both from local groups and interstate/national operators as Brisbane’s F&B scene continued to mature.
“However, secondary CBD locations are struggling and contributing to the increased vacancy rate largely due to the flight to quality currently underway,” Jabangwe said.
Jabangwe said luxury retailers such as Balenciaga and Louis Vuitton had demonstrated their confidence in the CBD by committing to high-end space in Queens Plaza, with a number of active requirements still out in the market.
Adelaide CBD retail
CBRE Associate Director, Retail Leasing, Julia Pottenger said that Rundle Mall’s vacancy was the tightest it has been in almost 15 years at 4.1% despite the overall Adelaide CBD vacancy rising in Q1.
“In the last 12 months, retailers such as Dymocks and Rebel Sport have opened flagship stores in Rundle Mall, with fashion, street and sportswear retailer Glue opening its first South Australian flagship and Japanese fashion brand Uniqlo set to follow suit late this year,” Pottenger said.
“This highlights the ‘flight-to-quality’ and ‘experiential retail’ trend we’ve seen across the country.
“QBD Books has also opened its first Rundle Mall store – its largest nationally – while Britain’s JD Sports will soon open a CBD flagship store.
“Off-market deals for space in Rundle Mall have also surged, indicating a competitive leasing market for occupiers. International retailer demand is also increasing, with a number of brands visiting the city this year to inspect sites.”
Pottenger said the overall increase in the CBD’s retail vacancy had been driven by shopping centre vacancies, which rose 7.9% rise in H1.
“This increase was mainly due to accommodation being strategically vacant for redevelopment or relocations and notably within the Myer Centre where a large portion of the ground floor is vacant but under construction for the new Uniqlo store,” she said.
Perth CBD retail
While the Perth CBD retail market was still recovering from lengthy border and COVID restrictions, leasing activity is improving with Sephora set to open a store on the Murray Street Mall in 2023 and Chanel having relocated to a 700 sqm flagship site on Murray Street in June.
CBRE Senior Director and WA Head of Retail Fred Clohessy said a rebound in Perth’s office occupancy following the relaxing of COVID restrictions had brought some much-needed relief for CBD retailers.
“In June, Perth CBD office occupancy rebounded to 65% – the second highest in the country – after dipping to 45% in March 2022 when the state borders initially opened,” Clohessy said.
“Total passenger volumes have more than tripled since the borders opened, with the retail market also positioned to benefit from the state’s extremely strong economic fundamentals and rising interstate migration driven by the state’s relative housing affordability and employment opportunities.”
Multiple development projects were set to boost inner city retail activity in the coming years, including the new Edith Cowan University (ECU) CBD campus, a new hospitality and revitalised event space at Yagan Square’s Market Hall, a transformation of Carillon City and a $160 million office and retail project at 95-99 Barrack Street by Southern Cross Properties WA.