CBD retail vacancy falls, but tenant mix reveals real story

Our latest survey of prime retail cores across Australia's CBDs points to a market in genuine transition, with vacancy easing in five of the seven centres tracked over the past twelve months. Sydney CBD leads the improvement, tightening from 6.7 per cent to just 3.7 per cent, now the lowest vacancy of any mainland capital and a level that speaks to a retail core operating at close to full capacity. Perth and Melbourne have also recorded meaningful improvements, falling to 8.4 per cent and 7.6 per cent respectively, continuing a multi-year trend of steady recovery from the elevated vacancy that characterised these markets through 2023 and 2024.

Hobart joins the survey for the first time this period, debuting at 4.7 per cent, the second tightest core in the country behind only Sydney. This is not a surprise given Hobart's position as the nation's tightest office market at 5.2 per cent vacancy, underscoring just how compact and tenant-constrained the Tasmanian capital's city centre remains. Canberra Civic, by contrast, continues to carry the highest vacancy in the survey at 13.2 per cent, though this too has improved from 15.5 per cent. As with the office market, this is best read as a structural rather than cyclical issue, a retail core built around a public sector workforce that is consolidating and decentralising away from traditional Civic tenancies rather than expanding into them.
 

Brisbane is the outlier in an otherwise improving national picture, with vacancy climbing from 10.9 per cent to 13.1 per cent, now the second highest in the survey. This sits at odds with Brisbane's position as the nation's strongest office market on a vacancy basis at 10.2 per cent and with its status as Australia's most expensive CBD parking market. The divergence suggests retail supply and tenant churn are moving ahead of underlying demand in the Queensland capital, a dynamic worth watching as the city moves through its infrastructure and Olympic-linked construction cycle.
 

Vacancy alone, however, only tells part of the story. The more revealing shift is in what is actually occupying these CBD cores. Cafés and restaurants have expanded their footprint in almost every market, most notably in Canberra Civic where food and beverage now accounts for 33 per cent of tenancies, easily the largest single category nationally. This is less a retail success story than a reflection of a public service lunch trade rather than a genuine shopping destination, reinforcing the structural nature of Canberra's retail challenge. Melbourne and Adelaide show a more balanced spread across food, clothing and personal and household goods, pointing to CBDs that are functioning as broader lifestyle precincts rather than single-purpose retail strips.