Retail vacancies rise and demographic visitor trends shift in Australia's major CBD markets
Retail vacancies rise and demographic visitor trends shift in Australia's major CBD markets
| 28 July 2021
The retail vacancy across Australia’s major CBD’s has risen to 12.9% amid the fallout from the pandemic and an increased shift to online retailing
CBRE’s first Australian CBD Retail Vacancy report highlights that Sydney fared best in H1, with a vacancy rate of 8.3%, while Perth’s vacancy surged to 26.7%, representing more than a quarter of the city’s retail stores.
Sitting in between is Brisbane at 12.7% followed by Melbourne at 12.8% and Adelaide at 13.3%.
CBRE Research Analyst Gus McConnell said the firm had utilised store counts of 4,532 retail outlets across the five CBDs in addition to demographic and footfall data from Pathzz, a proprietary technology platform linked to CBRE, to analyse the current state-of-play in the major CBD markets.
“A range of CBRE retailers, mainly those in the clothing and soft goods industries, have closed their bricks and mortar stores and moved to a more online-centred platform in response to lower CBD foot traffic,” Mr McConnell said.
“Through Pathzz technology, we’ve also been able to measure the difference in demographic visitation, daily visit trends and commute types from FY20 to FY21 and assess how these have shifted as a result of COVID-19.”
CBRE’s Australian Head of Retail Leasing, Leif Olson said the report highlighted that the main driver of CBD vacancy had been in shopping centres and arcades, with a smaller proportion of the vacancy in CBD strip locations.
“The data also shows a steady increase in office workers coming back into the major cities in the first half of the year - prior to the current Sydney and Melbourne lockdowns - which underpinned a rise in retail turnover and tenant demand,” Mr Olson said.
“Weekend visitation has also risen in some capital cities, driven by localised tourism, which has provided retailers with an alternate revenue source.”
Mr Olson also noted that while retail vacancy had increased across the country, opportunistic retailers had sought to capitalise on favourable market conditions and transact in the current market to secure new CBD locations.
CITY BY CITY TRENDS
The 8.3% vacancy rate compares to the 3.7% count in the last CBRE recorded period in June 2019. The biggest contributor to the increase in vacancy in this 24-month period was the clothing and soft goods category, with 32 fewer CBD stores in this category (the city’s biggest retail tenancy group).
CBRE’s report links the decline to brick-and-mortar stores moving their operations online, coupled with a 1.7% decrease in total retail employment in NSW since February 2020.
Notwithstanding this, Mr Olson noted, “Spending on clothing retailing in NSW is up 36.8% since the start of last year, which may coerce some clothing retailers to migrate back to the CBD to take advantage of this elevated customer spend.”
CBRE’s Australian Head of Retail Analystics Matt Copus said the report also highlighted a significant shift in visitor demographics since the onset of COVID-19.
“There has been a significant increase in the proportion of families and older age groups visiting the city, while the total share of visits from the 15-29yr old age group dropped by 6.6%,” Mr Copus said.
“Our Pathzz data also highlights that a greater proportion of couples with children are visiting than previously (up to 65.5% from 54.0%), while younger visitors are frequenting local regional and super-regional shopping centres instead of the CBD. People over 40 who likely retained their employment visited their city offices at a steady pace and, as a result, visited the Sydney CBD retail precinct more frequently than other age groups.”
The Melbourne CBD, which has the highest number of surveyed retail outlets, was the hardest hit by the pandemic with an extended lockdown period, low office occupancy levels and a reduction in international students.
Although foot traffic is slowly returning to pre pandemic levels, retail vacancy has increased to 12.8% from 2.7% in 2019 to be well above the long-term average of 3.2%. Like Sydney, the greatest contributor to this rise was the clothing and soft goods category.
Not surprisingly, the largest spike in vacancy was in retail close to Melbourne’s universities, given the high dependence on international students.
On the demographic front, Mr Copus noted that of the five CBDs covered in the report, Melbourne had the highest level of 30-49yr old visitors (at 38.7%), and a comparatively higher number of young professionals going into the CBD.
“The changes in the Melbourne CBD visitor demographic are similar to Sydney’s CBD, namely employees restructuring their work from home strategies, young people losing their employment and a stronger adoption of online shopping,” Mr Copus said.
The Brisbane CBD retail vacancy, which historically has measured higher than Melbourne and Sydney, was 12.7% in H1 2021. The report highlights that Brisbane’s vacancy rate has remained relatively stable due to limited lockdown periods, which has seen foot traffic remain somewhat consistent as the city has navigated the pandemic.
Mr McConnell noted that this stability could also be attributed to the city’s smaller proportion of clothing and soft goods retailers (19%) than other capital cities.
“Hospitality, which encapsulates cafes, restaurants and F&B, represents 35% of the city’s total retailers. With turnover for cafes, restaurants and F&B services in Queensland 14.6% higher than pre-COVID levels, this has assisted those hospitality retailers in keeping their doors open and the vacancy in Brisbane lower than expected,” Mr McConnell said.
The Brisbane CBD has the highest proportion of strip tenancies in comparison to other cities at 46.1%, and also the highest vacancy of strip retailers at 14.1%, which was the biggest contributor to the overall city vacancy.
Mr Copus noted that the demographic profile of Brisbane CBD visitors had remained mostly stable as the effects of the pandemic on everyday activities had been limited. Younger people and couples with children were the main visitor demographic, with a much lesser drop in 15-39yr old visitors compared to other states.
Perth’s vacancy rate of 26.7% follows ongoing issues for the city retail market, with the city’s vacancy rate having been climbing for the past decade (CBRE data shows the vacancy has been above 20% since 2018).
This heightened vacancy is particularly evident in the city’s centres and arcades, with some of these locations having vacancy rates close to, or above, 50%.
However, Mr McConnell noted that there were there were signs of reinvigoration in the Perth CBD, with the city’s office occupancy level of 76% as of June 2021 being higher than Brisbane, Melbourne and Sydney. Additionally, the WA Government is investing $1.5billion investment into the CBD through the ‘Perth City Deal’, with promising signs also for total retail turnover growth for the state, which is up 6% since the end of 2020.
“All of these factors point to a much-improved outlook for the Perth CBD retail district in the long-term,” Mr McConnell noted.
Mr Copus said foot traffic in the Perth CBD has been the most consistent of all the cities surveyed over the past 12 months, showing the smallest dip in foot traffic levels. The CBD also saw a larger proportion of young professionals visit the CBD compared to other cities, with 35.6% of all visitors being in the 25-39yr age bracket.
The Adelaide CBD’s retail vacancy of 13.3% is above the historic average of 7%-8%. However, while the vacancy increased over the first half of the year, Mr McConnell said this upwards pressure has been softened by the diverse pool of retailers within the CBD. Adelaide also has the lowest proportion of clothing and soft goods retailers of the five surveyed CBD markets.
Vacancies in the city’s strips and arcade centres have been kept in check, measuring 7.6% and 2.0% respectively. While Rundle Mall has a large proportion of clothing and soft goods retailers (at 36%), it has also weathered the pandemic well and has only increased vacancy by 90bps from 6.7% to 7.6%.
However, this has been offset by the steep rise in vacancy in the Adelaide CBD Centres to 19.8%, with these centres now repositioning themselves to incorporate more mixed-use operators to combat this increase.
Like Brisbane, there was a lesser variance in the visiting demographic from the 2020FY to the 2021FY. Notably, Adelaide had a greater proportion of couples without children visiting the CBD than every other city except Perth and retained its proportion of younger visitors.
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