JLL's research reveals a continued improvement in Australia's retail property market, with overall vacancy rates declining to 4.7% in December 2024, down from 5.5% a year earlier.

James Hayward, JLL Research Analyst, commented on the findings: "The retail sector has demonstrated resilience over 2024. CBD locations, in particular, have shown a strong recovery, with vacancy rates dropping from 11.6% to 10.0%. This significant improvement signals a revitalisation of our urban centres and renewed confidence among retailers."

CBD vacancy rates fell by 1.6 percentage points (pps), the largest decrease across all retail formats. Neighbourhood centre vacancy rates reduced from 5.9% to 4.9%, regional shopping centres improved with vacancy rates dropping by 0.8 pps to 1.7%, and sub-regional centres also saw improvement, with vacancy rates declining by 0.6 pps to 4.2%.

Lee McLaughlin, JLL's Head of Retail Leasing & Tenant Representation, Property and Asset Management on insight into regional variations said, "Sydney has emerged as the standout performer, boasting the lowest vacancy rate of 3.9% across all asset sub-sectors. This represents a significant 1.3 percentage point decrease year-on-year."

The average geographical vacancy rate, excluding Canberra, stands at 5.2%. While most major cities saw improvements, Perth continues to face challenges with the highest vacancy rate at 7.8%. Brisbane was the only city to record a slight increase, up 0.1 percentage points to 5.3%. 

Melbourne and Adelaide also showed positive trends. Melbourne's vacancy rate decreased by 0.8 percentage points to 4.1%, while Adelaide saw a 0.7 percentage point drop to 5.1%. 

The report attributes the positive trend to several factors including improved consumer sentiment, with discretionary spending up 2.4% year-on-year in December 2024, a 25-basis point cut in the official cash rate by the Reserve Bank of Australia in February, stimulating economic activity and limited new supply, with 2024 recording the second-lowest level of Australian retail completions since 1989.

"The scarcity of new retail developments, driven by elevated construction costs, is creating a unique market dynamic," said Mr Hayward. "It also offers opportunities for existing assets to capture increased demand."

"The sentiment in the leasing market is decidedly positive. Retailers and centre managers have adapted well to changing market conditions and consumer behaviours. Their proactive strategies are now yielding tangible results, as evidenced by the declining vacancy rates across most formats and locations," Ms McLaughlin added.

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