CBD Retail Goes Back to the Future

A retail renaissance is set to take place across Australia’s CBDs as governments invest in vital public transport infrastructure like the light rail which will support the expansion of retail outside of the core.

According to research from Colliers International, seasonally adjusted national retail sales data released by the Australian Bureau of Statistics continue to grow at 3.6 per cent year on year, just below the rolling 10 year average rate. Given the nation’s rotation toward the services orientated sectors, it’s unsurprising that retail sales are strongest within the south eastern states.

New South Wales and Victoria, now boast annualised growth rates of (4.95 per cent year on year) and (4.30 per cent year on year) respectively, comfortably exceeding the national average. Retail sales growth in resource orientated economies of Queensland and Western Australia are less impressive at just (1.2 per cent year on year) and (2.04 per cent year on year) respectively.

According to Michael Bate, Head of Retail and National Director at Colliers International, retail market conditions have been mixed across states, reflecting in part the ABS sales data trends.

“Within the CBD markets, our proprietary Colliers Edge data from Quarter 1 in 2016 (1Q16) suggests that rental growth has been the strongest in Sydney while incentive levels across almost all cities has remained broadly unchanged.

“CBD sales activity confirms this trend, with cap rates remaining the sharpest in Sydney and Melbourne, however we note that all CBD’s have experienced cap rate compression on an annualised basis.

“Going forward we expect apparel /department stores to maintain momentum and we should see some growth in cafes /restaurants as the impacts of the lower dollar and increased tourism take hold.

“The Light Rail really is a game-changer, especially for Sydney CBD retailers and harks back to the city’s glory days when trams connected shoppers with a network of department stores.

“Department store retailers like Marcus Clark & Co., Waltons, Anthony Hordern & Sons and Mark Foy’s ruled Sydney’s CBD up until mid-last century. In the CBD core alone there were around 18 department stores connected by Sydney’s network of trams.

“Fast forward to today and with retail vacancy at negligible levels, the requirement for larger floor space in excess of 2,000 sqm and significant growth in white collar employment retailers will now be forced to look outside the core of the CBD to the north at Circular Quay and south towards Central Station. The backbone of this retail renaissance is light rail, increasing connectivity between outlets and facilitating the necessary foot traffic to support new retailers,” he continued.

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