Retail Property Market Booms in Melbourne as Office Sector Lags Behind
Amidst the shifting landscape of the property market in Melbourne, recent data from CBRE’s Australian CBD Retail Vacancy report for the second half of 2023 highlights a notable trend: while the office sector continues to face challenges, the retail market in the Melbourne CBD remains robust and resilient.
According to the report, Melbourne stands out with the lowest vacancy rate among the four surveyed capital cities, recording a vacancy rate of 7.37 per cent.
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This statistic is underpinned by a significant drop of 330 basis points, signalling a surge in lease deals and sustained occupancy within the retail sector.
Despite relatively stagnant growth in discretionary spending throughout 2023, stability has characterized consumer behaviour, with cost-of-living pressures easing in the latter half of the year. Notably, total retail sales for the nation reached nearly $425 billion in 2023, reflecting a substantial 60 per cent increase from the figures recorded in 2013.
CBRE’s retail research head Amita Mehra said nationally there was a slow increase in more people shopping. “The return to office, coupled with increased tourism and international student inflows, has led to more foot traffic in CBDs, supporting occupier appetite for floor space within these markets,” Mehra said.
In Melbourne specifically, vacancy rates across all retail categories witnessed a decline during the latter half of 2023. Vacancies in laneways and strip retail notably decreased by 3.6 per cent and 3.5 per cent, respectively, indicating a buoyant retail environment across various commercial precincts in the city.
This surge in retail activity stands in contrast to the struggles faced by the office sector, which continues to grapple with uncertainties stemming from changing work dynamics, remote working trends, and ongoing economic fluctuations. While the office market is yet to witness significant recovery, the retail sector’s resilience underscores its importance as a stable and integral component of Melbourne’s commercial real estate landscape.
People still wanted an in-person experience while shopping, said CBRE retail property management and leasing head Sheree Griff. “Retail sales growth is attributed to consumers seeking to look good and feel good, with the strongest sales being reported in the wellness sector, cafes and restaurants,” Griff said. “Our view for 2024 is that leasing growth will occur across all markets as retailers partner with landlords to evolve and meet the live, work, and play needs of consumers.”
As Melbourne continues to navigate the complexities of the property market, the robust performance of the retail sector serves as a beacon of stability and opportunity amid broader economic uncertainties. With retail spaces remaining occupied and lease deals flourishing, stakeholders in the building, construction, design, and architecture industries are poised to capitalize on the burgeoning opportunities within Melbourne’s thriving retail property market.
CBRE retail leasing director Jason Orenbuch said that development in Melbourne would help increase retail demand. “Multiple other arcades and significant parts of existing centres were undergoing major redevelopment as of H2 2023,” Orenbuch said. “We expect these developments to continue to spur shoppers to re-enter the CBD over 2024, creating strong demand across the city.”
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