International Brands Fuel 30% Retail Rent Growth

Strong demand from international brands looking to expand into the Australian market underpinned significant rent growth in the retail sector in 2015, according to a new report.

CBRE’s Retail MarketView report shows super prime rental rents in the Sydney CBD lifted 30 per cent during the year, supporting a 12 per cent spike in rents nationally.

CBRE Head of Research, Australia, Stephen McNabb said the majority of states experienced rent growth in 2015, with Sydney, Melbourne and Perth experiencing the largest increases.

“In line with this growth, vacancy rates for CBD super prime spaces are low, with almost zero availability in Sydney and Melbourne.”

Leif Olson, Head of Retail Brokerage, Australia said the low CBD vacancy rates meant landlords were able to be more selective with tenants, with international brands being favoured. In Sydney alone Microsoft, Zara Home, H&M, COS, Rimowa, Cartier and Forever 21 opened over the past 12 months.

By comparison, regional and neighbourhood centres experienced relatively low rent growth in 2015, with net face rents increasing 1 per cent and 1.2 per cent respectively.

“This suggests regional and neighbourhood centre rents are in an environment of low to moderate growth,” said Mr McNabb.

To adapt to changing consumer behaviours, which is underpinned by Australia’s diversifying population mix, preference for international retailers and the advancement of online retailing, both retailers and landlords invested in and implemented new retail strategies in 2015.

“The results of these investments are beginning to pay off, with market analysis revealing that the share of online dollars going to traditional retailers has significantly increased in the past five years,” said Mr McNabb.

The department store sector, in particular, demonstrated this trend, recording a 2.5 per cent increase in sales for the year - the strongest sales growth since 2009.

Leif Olson said: “Following a period of sluggish sales, department stores implemented new strategies in 2015, with examples including David Jones’ acquisition of a smaller footprint at Barangaroo, the consolidation of brands and products and strategic store closures in certain locations."