Melbourne has emerged as the come-back kid in Australia’s CBD retail recovery, leading the pack in an overall vacancy rate recovery.
Melbourne’s vacancy rate dropped significantly by 5.6 percentage points and currently standing in the single digits in the second half of 2022.
Nationwide, Australia’s CBD retail vacancy rate improved from 15.9 per cent in H1 2022 to 13.9 per cent in H2, reflecting a delayed recovery from pandemic-related challenges, as per new data from CBRE.
CBRE’s H2 CBD Retail Vacancy report, which analyzed 5,347 retail outlets across Sydney, Melbourne, Brisbane, Perth, and Adelaide, attributes the improved outlook to higher office occupancy rates, a surge in inbound tourism, and the return of international students.
Adelaide was the second-best performer, with a drop of 3.71 percentage points, while Perth’s vacancy rate decreased marginally by 0.41 percentage points.
Although Sydney’s CBD vacancy rate remained the lowest in the country at 8.3 per cent, there was a slight increase of 1.39 percentage points in H2. Brisbane was the only other city to experience an increase in vacancy rates, with a small rise of 0.28 percentage points to 18.4 per cent.
“Despite heightened cost of living pressures, there were healthy levels of discretionary spending in H2, with the re-opening of China’s borders expected to provide another boost to the country’s CBD retail markets,” CBRE’s Australian Head of Retail Research Kate Bailey said.
“Retailers are also on the expansion trail, with our latest Asia Pacific Retail Flash Survey showing that 83% of Australian respondents plan to grow their store networks this year, with 61% planning to increase the quality of their store locations – a move which will favour CBD markets.”
Sydney
Despite a low vacancy rate of 6.9 per cent in H1 2022, Sydney’s CBD saw a slight increase of 139 basis points to 8.3 per cent in H2.
Leif Olson, CBRE’s Australian Head of Retail Leasing, emphasised that Sydney still had the lowest CBD vacancy rate in the nation, thanks to rising office occupancy, inbound tourism, and returning international students.
Melbourne
Melbourne made a robust recovery in H2, 2022, after being heavily impacted by COVID lockdowns and border closures.
The vacancy rate decreased by a remarkable 567 basis points, as office occupancy rates increased and CBD spending in December surpassed inflation-adjusted levels of 2019.
According to Jason Orenbuch, CBRE Associate Director of Retail Leasing, the sharp decline, especially in center retail properties in the CBD, may be partially attributed to the traditional leasing demand in the lead-up to Christmas and the holiday period, with specialty pop-up shops occupying many empty stores.
Brisbane
Brisbane’s CBD vacancy remained relatively stable in H2, rising just 28bps after a large jump in H1.
Adelaide
After jumping 260bps in H1 2022 in a lagged response to COVID-19 pressures, Adelaide’s CBD vacancy dropped by a staggering 371bps to 13.3 per cent in H2.
Perth
After feeling the impacts of lengthy border closures and COVID restrictions, Perth’s CBD retail vacancy tightened 41bps to 26.1 per cent in H1.