APPD Market Report Article

Adelaide

May 31, 2022

-0.4%

AUD 1,239

Decline
Slowing

Demand is mixed as COVID-19 continues to impact spending

  • Retail trade in South Australia (SA) continues to moderate from the COVID-19 related consumption highs recorded in 2020 and early 2021. As at February 2022, rolling annual retail trade growth in SA reached 2.9% – the slowest rate of annualised growth since May 2020.
  • Despite slowing retail trade growth, opportunistic national and global retailers are opening new stores along Adelaide CBD’s main retail thoroughfare, Rundle Mall. New retailers to open or announce stores over the last six months include Uniqlo, JD Sports, Supre, Industrie, Rebel Sport, Foot Locker and Dymocks.

Multiple new projects commence construction in 1Q22

  • The future supply pipeline increased in 1Q22 with multiple new projects commencing construction. New neighbourhood centre Hendon Central (4,100 sqm) got underway and a new outlet centre District Outlet Centre (14,000 sqm) also broke ground. This brought total supply under construction to 29,800 sqm.
  • Vacancy has generally stabilised across most sub-sectors after increasing in the early COVID-19 period. The vacancy rate in Adelaide’s regional, sub-regional and CBD sub-sectors all decreased in 4Q21.

Yields are firming in the sub-regional sub-sector

  • Average rents were stable across all sub-sectors in 1Q22 with the exception of the CBD sub-sector, which is challenged with lower daily foot traffic as a result of fewer CBD workers in the city.
  • Yields were stable in the neighbourhood, CBD and large format retail sub-sectors in 1Q22. Compression was recorded in the regional and sub-regional sub-sectors, as confidence in retail assets with higher exposure to discretionary retailers improved.

Outlook: Investment demand for retail assets should continue in 2022

  • Occupier demand will remain patchy over the short term. The recent surge of the COVID-19 Omicron variant has put pressure on daily pedestrian footfall levels over the first three months of the year. However, consumer demand for discretionary goods such as fashion, homeware as well as dining out remains positive in South Australia, which will support retailer business confidence.
  • Investment demand is expected to remain positive with retail yields offering value compared to the industrial and office sector. However, transaction volumes may be dampened by low levels of assets brought to market.

Note: Adelaide Retail refers to Adelaide's overall retail market.

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