In the last half of 2023, Brisbane’s Central Business District (CBD) saw a slight tightening in its retail vacancy rate, dropping from 19.5% in the first half of the year to 18.7%. Despite this improvement, it remained one of the highest among Australia's major cities. Yet, this high vacancy rate might be seen as an opportunity rather than a challenge for businesses looking for retail space.
The retail market in Brisbane's CBD has remained resilient despite its challenges. Key factors, such as a solid return to office, strong population growth, and a steady improvement in international tourism, have all contributed to this resilience.
One trend to note is the so-called "tenant flight-to-quality". This refers to tenants' preference for high-quality spaces in prime locations, which can accommodate flagship stores and attract more foot traffic. Tenants previously occupying lower-grade arcade space are now focusing on site fundamentals that offer better exposure.
In addition to these trends, numerous redevelopments are underway in Brisbane's CBD, which are set to revitalise the area and potentially further tighten retail vacancies. These include revitalising key retail hubs like the Eagle Street Pier and introducing new retail space in developments like Queen’s Wharf.
The underground arcade of Post Office Square is also undergoing redevelopment, expected to increase demand for new food retail tenants, particularly for quick-service restaurant space.
Taking Advantage of High Vacancy Rates
Although a high retail vacancy rate might seem like a negative indicator, it can present opportunities for businesses looking to secure retail space in prime locations. With a higher vacancy rate, landlords may be more willing to negotiate lease terms and rates, offering potential tenants better deals than in a tighter market.
Despite the high retail vacancy rate and cost-of-living pressures, the overall outlook for Australia’s 2024 retail landscape remains positive. Retail sales in Australia were near $425 billion in 2023, demonstrating the strength and resilience of the sector.
Brick-and-mortar spaces are highly desirable for retailers seeking to establish vibrant and innovative brand identities. The wellness sector, cafes, and restaurants have reported the strongest sales.