Shopping Centres Australia 2024

Key Points:

• Booming spend. CBRE forecast retail sales will grow to $500bn by end of the decade supported by a triple boost of population growth, jobs growth and income growth.  Look good, feel good and travel well – we estimate these categories have taken an extra 8% share of wallet over the past 20 years. 
• Occupancy costs. For retailers, occupancy cost ratios (OCR) have declined over the past 5 years.  For categories such as Women’s Fashion, Café/Restaurant and Mini-Majors, OCRs are ~15% lower today than in 2019. This is due to re-based rents and higher retail sales. For example, mini-major sales have outpaced rent growth by ~15%.
• Vacancy. CBRE estimate 0.78m sqm of future shopping centre supply over 2024-2028, at less than half of historical average. Australian shopping centre vacancy is currently sub 5% and we anticipate further vacancy rate compression as city centre performance improves.
• Defensive. 94% of shopping centres have at least two daily needs supermarkets, comprising around 11% of gross lettable area. Omni-channel click and collect/return facilities, particularly for time-sensitive delivery, justify physical presence.  
• Residential.  Centres located on larger sites, close to transport and in areas where residential rents are high, may be early candidates for mixed use re-development. 
• Capital value.  CBRE expect shopping centre investment volumes will grow significantly between 2023 (cycle low) to 2025. In recent times, cap rates have been impacted by rising bond yields and interest rates, with nuances around asset-type and location.