Australia's retail leasing market sees steady demand

This is supported by improved office returns.

The leasing demand remains stable across Australia’s retail sector, driven by a return to office work and consistent consumer activity, according to a report by CBRE.

Large format retail is in high demand, particularly on the Eastern Seaboard, where there is no vacancy. Retailers are paying above-average rents, anticipating strong population growth and increased housing needs.

In the luxury retail sector, sales are soft, but there is still demand for larger properties, especially in Sydney and Brisbane, with Brisbane preparing for the 2032 Summer Olympics.

The food and beverage (F&B) sector is experiencing mixed results. Fine dining is struggling due to reduced corporate spending and falling sales, whislt the drive-through segment is experiencing steady growth, particularly in Queensland, where land is more plentiful and construction costs are lower. 

In the sporting goods sector, traditional retailers are facing challenges, but emerging brands are expanding in major cities like Sydney, Melbourne, and Brisbane. Additionally, some smaller retail segments continue to see strong sales and stable demand.

Emerging trends include department stores downsizing, which could lead to the development of new, smaller concepts in the retail space. 

The entertainment sector is also growing, driven by strong consumer demand, with companies becoming more flexible in their approach to space and rents. 

Looking ahead, CBRE said discretionary spending in the F&B sector could increase if interest rates fall, which would boost leasing demand. Whilst the central business district (CBD) market currently favors tenants, landlords may regain leverage within the next 12 to 18 months as vacancy rates decrease, although demand for secondary space may remain sluggish.