Melbourne Leads as Retail Vacancy Rates Tighten

Australia’s retail property market is experiencing a shift, with Melbourne leading the way with the lowest retail vacancy rates, while Perth and Brisbane have the most available retail space. This trend has a direct impact on rental prices, investment opportunities, and retail business viability.

Retail Vacancy Trends Across Major Australian Cities

Melbourne: Lowest Retail Vacancy Rate in Australia

• Vacancy Rate: 6.0% (declined by 85 basis points in the second half of 2024).
• Trend: Third consecutive period of declining vacancies, indicating a strong retail sector.
• Reasons for Growth:
  • Increased foot traffic due to office workers returning.
  • Rise in tourism and international students.
  • Higher demand for prime retail locations.

Perth: Highest Retail Vacancy Rate in Australia

• Vacancy Rate: 22% (highest in the country, despite a 285 basis point drop).
• Trend: While improving, vacancies remain significantly high.
• Challenges:
  • Slower economic recovery compared to Melbourne.
  • Oversupply of retail spaces, making it harder to fill vacancies.

Brisbane: Retail Market Improving but Still Facing Challenges

• Vacancy Rate: 18.5% (gradual decline in the last six months).
• Trend: Market conditions are stabilizing, but availability remains high.
• Key Factors:
  • Mixed economic recovery.
  • Landlords offering more incentives to attract retailers.

Retail Rental Prices: How Vacancy Rates Affect Costs

Melbourne Retail Rental Prices

• Due to high demand and limited space, rents are expected to increase.
• Retailers looking for prime CBD locations should expect higher leasing costs.

Perth Retail Rental Prices

• High vacancies mean lower rental prices and more landlord incentives.
• Retailers can negotiate better lease terms due to excess supply.

Brisbane Retail Rental Prices

• Prices are expected to remain stable or slightly decrease due to the high number of available spaces.
• Landlords may offer discounts or flexible lease agreements.

What’s Driving These Trends?

Several key factors impact retail vacancy rates:

• Economic Recovery: Cities like Melbourne are benefiting from stronger economic activity.
• Consumer Behavior: Online shopping continues to challenge brick-and-mortar retail stores.
• Office and Tourism Growth: Increased workforce presence and tourism positively impact retail foot traffic.

Future Outlook: What to Expect in 2025

• Melbourne: Retail vacancies will likely stay low, pushing rental prices higher.
• Perth & Brisbane: Gradual improvement is expected, but oversupply may persist, keeping rental prices competitive.
• National Trend: Australia’s retail market is tightening, with vacancy rates at their lowest since 2021.

Final Thoughts

For retailers and investors, Melbourne is currently the most attractive retail market, while Perth and Brisbane offer opportunities for cost-effective leasing. As the market stabilizes, rental prices and vacancy rates will continue to shift, impacting businesses and property owners alike.