Suburban gangs continue to trump pandemic-stricken CBD

Suburban Adelaide’s shopping and hotel streets are thriving with record retail vacancy rates as the CBD continues to suffer from density restrictions and work from door-to-door orders expected to further widen the Gulf in early 2022.

The latest Adelaide Retail High Street snapshot from real estate firm JLL released last week shows that low commercial space occupancy rates continue to hit the disproportionality of downtown Adelaide.

The trend is most visible on Hindley Street which, in the six months to the end of September, saw the largest increase in the mainstreet vacancy rate – from 13.8 percent to 17.3 percent percent.

That’s nearly eight percentage points higher than the average vacancy rate on main streets in the suburbs and the CBD, which stands at 9.4% according to JLL.

The city’s poor performance contrasts sharply with the suburban bands, which continue to thrive. Glenelg’s Jetty Road area fell to less than 5 percent while less than 7 percent of retail rentals on The Parade were vacant in the third quarter.

The commercial real estate company said the majority of the lost retail and hospitality locations on Hindley Street are on the west end and highlighted the notable closures of Lux Adelaide nightclub and Empire Shisha Bar.

The problems in the west of the CBD are mirrored in the east, with Rundle Street’s vacancy rate falling from 11.5% to 13.7% in the third quarter of 2021.

JLL said this was the highest vacancy rate on Rundle Street since they began measuring vacancies on main streets in 2015, although the company maintained a positive outlook for the strip given its proximity to Lot Fourteen and a series of new residential developments and the recently completed Crowne Plaza. Hotel.

The data was recorded during the current Omicron outbreak in South Australia and the state government’s implementation of a broad work-from-home policy which has seen many CBD-based officials fired. at home and private sector employees encouraged to do the same.

It was also pulled together before tighter density restrictions hit the state’s hospitality and fitness business sector, prompting the state government to release its seventh financial support package during the pandemic.

JLL Research Director Rick Warner said the January restrictions would increase pain for CBD companies.

“The immediate impacts of more white collar workers staying at home at the start of the Omicron period will be the increased hardship experienced by CBD retailers,” he said.

“Rundle and Hindley retailers have seen their worst in the past two years, as evidenced by our job vacancy data. “

Unlike the CBD, the major suburban streets continue to roll forward.

The gap in average vacancy rates between main streets in the suburbs and the CBD has increased by more than three percentage points from JLL’s first quarter report in 2021.

Jetty Road Glenelg posted its lowest vacancy rate on record at 4.7%, down 3.2 percentage points over six months, as the waterfront shopping street remained “one of the more attractive to fashion retailers, ”JLL said.

“Fashion accounts for 23 percent of total rentals on Jetty Road, just behind Rundle Street (27 percent) among Adelaide’s shopping streets,” the Main Street report said.

Elsewhere, retail demand continued to improve along The Parade in Norwood.

The eastern suburbs saw the vacancy rate drop from 1.1% to 6.4% in the third quarter of last year, down sharply from the vacancy rate of 14.7% at the end of the year. from 2020.

“The parade benefited from an immediate population increase due to the completion of new high density apartment developments along the strip,” the report said.

“Going forward, other major residential developments such as Norwood Green and Como (at the Coles Norwood site) currently under construction, will support continued growth in the retail customer base in the near term.”

The state government’s work from home counseling will provide new impetus for suburban retailers, Warner says, although it is unlikely to cause increased demand from tenants.

“Occupant demand in the commercial real estate space, especially in retail, is a bit slow, so the South African government’s work from home counseling is unlikely to support an increase in demand. tenant activity in suburban areas, ”he said. .

“This will be a bright spot for local cafes and discretionary retailers, but the density restrictions currently in place in the hospitality industry are not easily overcome for small business operators.”

Downtown O’Connell Street in North Adelaide was the only suburban strip to record a vacancy rate above 10% (12.5%), although JLL has a positive outlook for the area as the Planning continues on the 88 W ‘mixed-use development of Connell Street.

Warner said the positive outlook for JLL extends to the shopping streets of the CBD where a recovery “could occur this year.”

“Aside from Omicron’s current restrictions, when you zoom out and look at what’s going on in Adelaide, with the defense, tech and aerospace industries building up significant regrouping momentum, there will be an increase in the number of white collar workers in the city at any given time. ,” he said.

Warner said 87,600 square meters of “premium office space” is currently under construction in the CBD and an additional 75,000 square meters is expected to start over the next 12 months.

The new office space will be equivalent to 11.5% of the total CBD stock, according to Warner.

“We receive announcements every month from major global technology and aerospace companies setting up or expanding their operations. So whether hybrid working arrangements become the norm or we return to office work in the future, the city will maintain its position of the most densely populated on weekdays during the day, ”he said.

“What we’ll be paying special attention to in 2022 is whether daily retail spending extends beyond the 9th to the 5th.

“The nightlife economy is crucial for the CBD retail business outside of the Rundle Mall. Not just Rundle and Hindley, but important dining and hotel areas like Gouger, Waymouth, Pirie and The Lanes.

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