Shopping centre vacancies have soared to their highest levels in two decades as the COVID-19 pandemic continues to wreak havoc on Australia’s retail sector.
With hordes of office workers stuck at home and many larger retail chains downsizing their physical store portfolios, new research from leasing agent JLL shows the national average shopping centre vacancy rate rose to 5.1% in June 2020, up from 3.8% in December 2019.
The vacancy rate has risen across every retail category, with smaller increases in neighbourhood and sub-regional centres somewhat offsetting the impact of an historic spike in CBD vacancies, which soared past 10% in June.
When CBD and large format centres are included in the national average, the vacancy rate increases from 4.8% to 6.3%.
JLL Australia’s head of retail, property and asset management, Tony Doherty, said there’s been a rebound in sales and foot traffic since April, but between 5%-10% of stores across the company’s portfolio of 300 centres remain temporarily closed.
”There is a major operational focus for us on ensuring shopping centres are safe places as social restrictions have lifted in most states,” he said in a statement.
While national cabinet’s commercial tenancy code of conduct has helped SMEs secure rent relief from landlords, Doherty says many larger chains are shifting their focus to longer-term decisions about the size of their physical store networks.
This means higher vacancy rates may be here to stay for the time being, particularly as e-commerce continues to grow amid a second wave of coronavirus infections in Victoria.
“We remain cautious about the outlook for discretionary retail as stimulus measures roll off later in the year, which is likely to contribute to an upward trend in vacancy rates,” JLL’s senior director of retail research, Andrew Quillfeldt said in a statement.
“The events throughout the past few months, which have led to many discretionary retailers planning to shrink their store network, will likely polarise the retail property sector even more.”