Vacancies fall in large-format retail
Large-format retail is back in favour as vacancy levels drop significantly with growing supply to meet increasing demand, according to research by Colliers International.
The Colliers research shows that in the first half of 2014 the overall national vacancy rate in large-format retail dropped to 2.7 per cent, down from 6.9 per cent in the second half of 2013.
Brisbane (0.8 per cent, down from 9.0 per cent), Adelaide (0.9 per cent, down from 8.5 per cent) and Sydney (2.5 per cent, down from 6.0 per cent) saw the most remarkable drops in vacancy, with only Perth recording a slight increase from 3.0 per cent to 3.8 per cent.
Large-format retail vacancy rates
Market | Total | Sydney | Melbourne | Brisbane | Adelaide | Perth |
H1 2013 | 7.5% | 6.5% | 7.7% | 9.5% | 9.1% | 3.2% |
H2 2013 | 6.9% | 6.0% | 7.2% | 9.0% | 8.5% | 3.0% |
H1 2014 | 2.7% | 2.5% | 5.7% | 0.8% | 0.9% | 3.8% |
Source: Colliers International
Hardware is leading the demand for large-format space, said Tony Draper, national director of large-format retail at Colliers, but he added that homemaker centres are also experiencing more positive market fundamentals.
“In recent years the supply pipeline for large-format retail has been dominated by stand-alone hardware retail developments,” Draper said. “This has been driven by a focus on market share growth between Bunnings and Masters, resulting in a further 647,628 sqm of space completed nationally in the hardware category across 2013 and 2014.”
Source: Colliers International
However, with an improvement in consumer sentiment and generally stronger retail conditions, Draper forecasts a comeback for future integrated homemaker centre developments.
Large-format retail took a hit post GFC as investor interest waned, impacting both capital values and yields.
“Large-format retail was seen as more risky for some institutional property owners than other retail classes,” said Dale McDermid, national director of retail real estate management at Colliers International. “However, some centres with higher vacancy took the opportunity to adjust the mix of tenants in their centres, and this has had favourable results.”