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For lease: CBD shop vacancies at decades high

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The amount of vacant retail space in the Adelaide CBD is at its highest level since 1993, according to a new report, although demand for city office space is increasing.

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JLL’s Third Quarter Retail Market Commentary released on Tuesday shows the CBD’s retail vacancy rate has grown from 13.8 per cent in December 2020, to 16.8 per cent in the first half of 2021.

The number is well above the vacancy rates recorded in South Australia’s regional (3 per cent), sub-regional (5.5 per cent) and neighbourhood areas (5 per cent).

It is also the highest Adelaide CBD vacancy rate recorded since 1993, according to JLL.

In the city’s premier shopping strip, Rundle Mall, the vacancy rate slightly improved from 10.8 per cent to 9.3 per cent.

However, the shopping centres within Rundle Mall recorded a sharp decrease in occupancy level, with vacant space growing from 14.9 per cent to 19.3 per cent.

JLL research director Rick Warner said the ongoing high vacancy rates in the city was still a reflection of the adoption of hybrid work models by city employees, resulting in a decrease in daily consumer expenditure.

However, he said national retailers have generally been resilient over the pandemic, with positive signs emerging along Rundle Mall.

“There’s still a lot of opportunistic national retailers looking to secure well-positioned space along the strip,” he said.

“However, COVID-19 has been less kind to the local retailers, services and hospitality operators, where income buffers against a prolonged period of low spending was likely to be lower.

“The attrition rate of local smaller retailers in the CBD over the COVID-19 period has increased, which has adversely impacted the enclosed centres and malls that run off Rundle Mall.”

InDaily has previously reported concerns from merchants within Rundle Mall’s Regent Arcade about the amount of vacant space within the heritage-listed shopping strip.

JLL’s latest report also found that average retail rent prices in the CBD have decreased by 6.9 per cent over the last 12 months – the largest decrease of any of measured regions.

Warner said over the short-term, the vacancy levels in the CBD are “likely to remain elevated”, although it will “likely be confined to some of the enclosed centres of Rundle Mall with lower foot falls.

“My feeling is that Rundle Mall will be fine and vacancy should incrementally track downwards in 2022,” he said.

“Retail spending and retailer occupancy levels generally moves in line with CBD employment levels and the data is improving on that front.”

Meanwhile, Adelaide’s office market is faring slightly better than the retail sector, with CBD office vacancies down 0.5 per cent last quarter to reach 16.4 per cent – the lowest recorded level in the last 12 months.

The third quarter saw a net absorption of 7900 square metres of office space in the CBD, a surge JLL primarily attributed to expansions in the public sector.

The property company noted that both the federal and state education departments, along with SA Health and the federal government’s Department of Industry, committed to offices in the CBD last quarter, accounting for more than 11,000 square metres of newly occupied office space in the city.

“We expect that public sector demand will be positive in the future, but we see the private sector as driving occupancy moving forwards,” Warner said.

“Recent announcements from PwC and Deloitte about expanding its workforces in Adelaide has yet to be accounted for in our numbers.

“These companies, along with the growing cluster of technology companies looking to expand in the Adelaide CBD over the coming year, is supporting our JLL Research view of positive net absorption in 2022.”

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