• Sales volume in 2022 to date has been relatively subdued with only $570 million transacted this year;
• Online retail trade in Australia continues to gradually take a larger share of overall spending, making up 11% of total retail sales with $45 billion spent online over the past 12 months;
• Most discretionary spending industries experienced strong rises once again as consumer cautiousness lessened with clothing and footwear sales now 30% higher than levels last year;

Retail Market Summary

Retail trade has recovered strongly in Victoria and is now growing faster than the national average. Over the year to June 2022, annual retail trade in Victoria grew by 10.3%, more than double the 10-year trade average. Most discretionary spending industries experienced strong rises once again as consumer cautiousness lessened. Online retail trade in Australia continues to gradually take a larger share of overall spending accounting for 11% of total retail sales consumers spending $45 billion online over the past 12 months.

Sales Volume / Yields

Urban Property Australia research has revealed that total transactions in the Melbourne retail property market reached $1.9 billion in 2021, its highest level since 2018. Sales volume in 2022 to date has been relatively subdued with only $570 million transacted this year.

Yields have stabilised for the majority of retail asset types as investors remained cautious in the uncertainty of the behaviour of consumers post-pandemic. Over the year to June 2022, yields of Neighbourhood shopping centres have tightened as investors focused on non-discretionary spending in assets located in residential hubs. Yields for CBD and Regional shopping centres expanded through the past 12 months with subdued investor demand.

Melbourne Retail Transactions

Demand

Retail trade has recovered strongly in Victoria and is now growing faster than the national average. Over the year to June 2022, annual retail trade in Victoria grew by 10.3%, more than double the 10-year trade average of 3.8%. In comparison, Australian annual retail trade grew by 5.9% as at June 2022.

Most discretionary spending industries experienced strong rises once again as consumer cautiousness lessened, leading to an increase in mobility and improved business conditions with clothing and footwear sales now 30% higher than levels last year whereas retail trade of supermarkets increased by 2.9%.

Online retail trade in Australia continues to gradually take a larger share of overall spending. According to the ABS, as at June 2022, online sales made up 11% of total retail sales with Australian online sales with Australian consumers spending approximately $45 billion online over the past 12 months.

Victorian Vs Australian Retail Trade

Retail Strips

Total vacancy of Melbourne’s prime retail strips has risen to all-time highs with around 13% of all shops vacant. The vacancy levels of Bridge Road, Richmond is the highest at 20% with elevated vacancy rates at Chapel Street, South Yarra (19%), Fitzroy Street, St Kilda (13%) and Lygon Street, Carlton (20%).

The food and beverage sector increased its presence across the strips, growing in the majority of the precincts however a number of fashion retailers have vacated the prominent strips, impacted by store rationalisation and the growing influence of e-commerce.

With many strips having been re-discovered by locals now working from home, some retailers have successfully adjusted to the changing consumer trends. The elevated vacancy levels and rationalisation of some retailers has resulted in rental levels easing with some landlords also offering flexible lease terms and incentives to attract new occupiers.

The retail sector has improved at a remarkable pace and well beyond any forecasts. Now that more normalised spending patterns have emerged and if the economic recovery continues to gather pace, looking forward, Urban Property Australia expect to see a stabilisation of service-based consumption and a shift towards goods-based consumption moving forward which will benefit the retail strips markets.

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