Retail vacancy rates continue downward trend

Retail vacancy rates continue downward trendThe second half of 2014 saw retail vacancy rates continue to decline, signalling a gradual improvement in leasing markets, according to JLL Research.Figures show average specialty store vacancy rates fell across all retail categories and states in the second half of 2014, with JLL’s six-monthly survey revealing a decline of the national average to 3.2 per cent in December, down from 3.6 per cent in June.”The results indicate a slow and gradual return to the long-term average for vacancy rates,” said Tony Doherty, JLL’s Australian head of Retail, Property and Asset Management.”Although the reduction is a positive reflection of market conditions and correlates with a pick-up in retail sales through 2014, we continue to highlight that leasing conditions remain somewhat challenging to secure new tenants.” Doherty said the CBDs, particularly in Adelaide and Perth, were the biggest driver behind the declines, with vacancy rates falling from a “high level”. JLL’s figures reveal that Sydney remains the tightest retail market nationally, with its retail vacancy rate falling to 2.2 per cent, from 2.4 per cent in June 2014. Its CBD vacancy rate is the lowest in the nation, falling from 3.6 per cent to 3.1 per cent.”There are a few reasons for the improved tenant demand in the Sydney CBD,” Doherty said. “Sydney has benefited from a solid rebound in retail spending growth through 2014, inbound tourism has picked up significantly (7.1 per cent in the 12 months to September 2014) and the inflow of international retailers is not only supporting the super-prime CBD locations but also displacing a number of existing tenants to other locations around the CBD.”Meanwhile, Adelaide’s vacancy rate fell from 6.3 per cent to 4.6 per cent, driven by “a decline in the CBD vacancy rate and, to a lesser extent, in the neighbourhood and subregional categories”.Melbourne was stable, showing no change from its 2.5 per cent vacancy rate.”Modest declines” were reported in Queensland (to 3.9 per cent) and Perth (to 4.0 per cent).Nationally, the average retail vacancy rate for regional centres fell from 1.4 per cent to 1.1 per cent, in subregional centres it fell from 2.6 per cent to 2.4 per cent, and in neighbourhood centres it fell from 4.2 per cent to 3.9 per cent.”It’s also important to note that some centres have deliberately been holding vacancy in preparation for refurbishment or redevelopment works,” Doherty said.Figure 1Retail Vacancy Rates by Category