APPD Market Report Article

Adelaide

February 28, 2022

-1.4%

AUD 1,238

Decline
Slowing

National retailers still opportunistically looking for space

  • National and global retailers are still active in Adelaide, particularly in the CBD along the main retail thoroughfare, Rundle Mall. New retailers to open stores over the last six months include Supre and Industrie, along with expansionary moves from Rebel Sport and Foot Locker.
  • Retail trade continues to normalise against a period of accelerated spending in mid 2020 and early 2021. As at November 2021, South Australian rolling annual retail trade growth is 4.0%. The positive retail trade has been driven by an uplift in spending in the discretionary categories of fashion (28.2% y-o-y) and dining out (13.6% y-o-y).

Occupancy levels in most sub-sectors is improving

  • With the exception of the neighbourhood sub-sector, vacancy across all of Adelaide’s retail sub-sectors decreased over the last six months. The largest period-on-period decrease was recorded in the CBD, where vacancy reduced by 0.9 percentage points (ppts) to 15.9%.
  • The supply pipeline remains low, with a number of developments put on hold during the ongoing COVID-19 pandemic. One project commenced construction in 4Q21 – a 4,400 sqm neighbourhood centre developed in conjuction with a new greenfield residential community development at Gawler in Adelaide’s northern suburbs. Total supply under construction is 11,634 sqm.

South Australian retail assets remain attractive to investors

  • Average rents across all sub-sectors were stable in 4Q21 apart from the CBD where average rents continued to decrease (-0.25% q-o-q). On an annual basis, average rental growth in the neighbourhood and large-format retail sub-sectors has been positive, increasing marginally by 0.7% and 0.9%, respectively.
  • Quarterly transaction volumes totalled AUD 106.1 million in 4Q21. The two largest transactions were neighbourhood centres. Gawler Green was purchased by a local private investor for AUD 46.0 million on an initial yield of 4.70%. Secondly, Woolworths Walkerville was purchased by SCA Metro Convenience Shopping Centre Fund for AUD 33.7 million on an initial yield of 4.75%.

Outlook: The COVID-19 Omicron variant will impact retail sector recovery

  • The South Australian retail sector recovery trajectory was positive in 2021 with occupier and investor demand returning. However, current movement and capacity restrictions reintroduced as a result of the Omicron variant outbreak in December 2021 is expected to impact on retail trade for discretionary bricks-and-mortar stores.
  • Investment demand is expected to remain positive in 2022. Investors will remain attracted to the defensive characteristics of supermarket anchored neighbourhood centres. Opportunistic counter-cyclical investors are likely to remain active in the sub-regional and regional sector.

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

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