City retailers welcome back shoppers

City retailers are benefitting from the return of office workers, increased tourism and an influx of international students which is boosting occupancy not only at food outlets but also in luxury stores.

While city office towers have more people attending mid-week, stores in the main pedestrian thoroughfares are showing signs of stronger demand throughout the week and on weekends.

Interactive stores such as LEGO are proving popular with city shoppers.
Interactive stores such as LEGO are proving popular with city shoppers.Credit: Eddie Jim

There has been a plethora of new leases, with the more popular tenants being interactive stores like LEGO in Sydney’s Pitt Street Mall and Fortress in Melbourne Emporium.

CBRE’s Australian CBD Retail Vacancy report for the six months to the end of December reveals that of the four capital cities surveyed, Melbourne continues to record the lowest vacancy rate in the country, at 7.37 per cent.

In Sydney, the CBD recorded a decline of 275 basis points resulting in an 8.1 per cent vacancy. Brisbane and Perth each had a marginal tightening to have vacancies of 18.7 per cent and 25.3 per cent respectively.

CBRE’s Australian head of retail leasing, Leif Olson, said retail sales growth and returns to the office have underpinned a reduction in vacancies.

‘Retailers are focusing on their connection to consumers, which has resulted in bigger, curated-experience stores, a trend we’re seeing across the globe.’

Leif Olson, CBRE Australian head of retail leasing

“Sydney is viewed as a good place for international brands to do business, given Australia’s strong and safe economy and consumer spending power,” he said.

“Retailers are focusing on their connection to consumers, which has resulted in bigger, curated-experience stores, a trend we’re seeing across the globe.”

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In Melbourne, vacancies across all three retail categories fell over the last six months of 2023. The largest recorded declines were seen in laneways and arcades, and strip retail, at 3.6 per cent and 3.5 per cent respectively.

CBRE director, retail leasing, Jason Orenbuch said Melbourne’s CBD was undergoing significant change, with major developments taking place throughout the city.

“One of the most notable is the new Metro Tunnel project, which will see new stations sprawled from north to south and including a number of new retail outlets throughout”, Orenbuch said.

“Multiple other arcades and significant parts of existing centres were undergoing major redevelopment in the last six months of 2023.” These developments are expected to entice shoppers back to the CBD in the coming year.

On the investment side, a surge in demand from small to medium funds, syndicates and private investors is offsetting a drop in traditionally dominant institutional capital.

Colliers managing director of retail capital markets Lachlan MacGillivray said that while market fluctuations saw institutional capital adopt a more cautious approach, other funds, syndicates and private investors came back to the market.

“Robust deal flow of $6.28 billion last year and heightened interest from fund/syndicate and private investors is due to strong asset performance and major undersupply of retail space, complemented by quality leases and strong tenant demand,” MacGillivray said.

“On-the-ground insights from major retail investors indicate a looming groundswell of activity which could lead to quality asset demand outstripping supply of assets in 2024.”

This includes more than $1 billion in assets currently under due diligence, as “counter-cyclical opportunities to acquire high-performing centres maintain relative value attraction,” he said.

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Source: Thanks smh.com