Melbourne prime retail continues to outstrip Sydney

by AB17 Oct 2013

While the Melbourne retail market has outperformed Sydney in the post-GFC period, a recalibration is in the wings, according to the latest ViewPoint from CBRE.

The report claims that a cyclical shift is expected to close the gap in the next year or so, with growth in NSW to outstrip that of Victoria.

CBRE research analyst, Kevin Tong, says an improvement in consumer sentiment in recent months suggests that lower interest rates are positively impacting the market and that this will provide a more supportive environment for retailers in 2014.

However, CBRE is forecasting more growth upside in NSW in the short term after a sustained period of weakness.

"Over the past few years we have seen a marked divergence between the Sydney CBD and the Melbourne CBD, specifically in the Super Prime retail market," says Tong.

"While Sydney remained relatively stagnant, Melbourne net-face rents continued to grow and in fact outstripped Sydney for the first time during 2012. However, a cyclical shift is expected to close the relativities in the next year or so. Nationally we expect rental growth to improve from near flat levels at the end of 2013 to around 1-1.5% in 2014, with NSW to experience more improvement than Victoria over that period."

However, while Sydney is expected to make a comeback in relation to rental growth, Melbourne is expected to retain its positioning as the more attractive market for new retail entrants according to CBRE senior director, retail services, Josh Loudoun.

"In the past 12 months, we've seen that international brands are now prepared to open in Melbourne before Sydney, which is something that we haven't seen before," Loudoun says, citing recent lease commitments such as Uniqlo to Melbourne's Emporium complex and Dolce & Gabbana to Collins Street.

"Melbourne has done an excellent job in marketing itself to international brands and establishing the city as a leading retail destination."