Australia’s CBD retail landscape is evolving in the face of continued headwinds, with brands harnessing creativity and innovation to increase their consumer wallet share.
CBRE’s Q1 Retail MarketView report highlights the ongoing need for both tenants and retail landlords to recalibrate their offerings in response to changing market conditions.
“While CBD retail remains more insulated from headwinds than shopping centres, there is an increasing need for landlords to be more creative in repositioning their assets to secure tenants,” CBRE’s Head of Logistics and Retail Research, Kate Bailey said.
The latest research shows 65,000sqm of new CBD retail supply is slated nationally in 2019 – the largest annual total since 2014. The majority of new supply will be in Sydney (52,000sqm), followed by Melbourne (9,000sqm) and Adelaide (5,100sqm).
“In Sydney, David Jones’ refurbishment of its Elizabeth Street flagship store (39,000sqm) is the main development in the pipeline. Increasing its product mix towards luxury, beauty, shoes, and food, the department stores’ refreshed offering is indicative of wider CBD trends nationally,” Ms Bailey added.
CBRE’s Victorian Director of Advisory & Transaction Services – Investor Leasing, Zelman Ainsworth said retailers were diversifying their offering by experimenting with store formats in CBD locations around the country.
“The CBD retail landscape is evolving, with more retailers looking at how they can readjust their footprint to leverage the more populous metropolitan markets. An example of this is Ikea’s new small format store – a digital format store spanning less than 100sqm. This trend isn’t an anomaly, with the majority of other traditional large format retailers now leaning on technology and logistics to reduce the typical large format stores – allowing them to bring their retail networks closer into the CBD, where the density is,” Mr Ainsworth said.
“Bunnings has also been building small format metropolitan stores over the years, while Baby Bunting, Woolworths, Coles, and David Jones are other major retailers transforming their retail networks in line with the rise of inner-city apartment living.”
CBRE’s Head of Retail Leasing for Australia, Leif Olson, said with the increasing digitalisation of retail, these retailers were opening more doors in Australia’s major CBDs.
He noted: “Not only have tenancy mixes changed significantly over the past five years, with a more concentrated focus on food & beverage and entertainment, traditional retailers are focusing more on their store size and getting more productivity out of their spaces. We are seeing car brands, hardware, and small format supermarkets, making a push into cities, which we haven’t previously seen.”
Mr Olson said there was also an increasing focus on activation of under-utilised spaces such as basements and building entry lobbies.
“Highlighting this, Kyko Group refurbished its building on the corner of King and Elizabeth streets in Sydney, allowing premium international brand Acne Studios take a prime corner with high exposure. Another example of this is 4 Bridge Street in Sydney, with the landlord capitalising on the increasing demand for boutique food & beverage in the CBD by converting the former hair salon to a restaurant, accessed via the rear lane.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit, www.cbre.com.