APPD Market Report Article

Sydney

September 4, 2023

Andrew Quillfeldt, Head of Capital Markets Research, Australia

0.0%

AUD 1,710

Rents
Stable

Strong demand for super prime CBD space

  • Retail spending remained broadly stable from the previous quarter. Discretionary spending categories recorded declines in spending, with consumers pulling back most significantly on household goods.
  • Retail leasing activity was resilient in the CBD, with established clothing brands continuing to expand their physical footprints.

Only one retail project reaches completion

  • Retail project completions remained subdued with only one neighbourhood centre totalling 18,000 sqm reaching completion in the quarter.
  • The supply pipeline is forecast to remain low over the rest of the year, with only five tracked projects due for completion.

Most sub-sectors record 12 to 25 bps yield softening

  • Rents across all sub-sectors held flat on a q-o-q basis. Annually, the CBD sub-sector continued to record the largest movement with a decline of 9.81%. 
  • Excluding the CBD sub-sector which remained stable, all sub-sectors recorded yield softening. The neighbourhood sub-sector recorded the most significant q-o-q and y-o-y softening of 25 bps and 87 bps respectively.

Outlook: Minimal retail supply additions in H2 2023

  • The futures markets anticipate the RBA to raise interest rates further in 2023, and this is likely to drive further asset revaluations and yield softening.
  • Construction activity is expected to remain subdued over the latter half of 2023.
Note: Sydney Retail refers to Sydney's overall retail market.
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