- Adelaide's large format retail sector has recorded record low vaccancy rates
- The tight market is spurring developers to invest in the area
- Headwinds for the sector are coming in the form of interest rates and elevated construction costs
The Large Format Retail (LFR) market in Adelaide is tightening with the vacancy rate narrowing to a record low of just 0.58% according to CBRE’s latest data.
This figure is a far reach from the 4.68% LFR vacancy rate recorded pre-COVID. The market has tightened even in the last few months, having dropped from the 1.85% recorded in Q1.
Mirroring the declining vacancy, LFR rents have continued to climb with the growth of 2.2% y-o-y recorded in Q2, 2022, following a 6.1% increase in the corresponding period last year.
CBRE’s Adelaide LFR Director Dallas Sears said the strength of the market had underpinned a number of new development projects including a circa 4,000sqm site at Munno Para and a circa 3,500sqm site at Parafield.
“The positioning of these developments will see a 15km stretch from Gepps X to Elizabeth Playford Plaza become an LFR hot spot, including five main retail sites,” Ms Sears said.
“This area is one of the fastest growing residential areas in Adelaide and the demographics show that Large Format Retail is under-represented in this area.
“There is a real need for a quality retail centre in this location to support the influx of new residents”.
Dallas Sears, CBRE’s Adelaide LFR Director
In a further sign of market demand, Ms Sears recently negotiated four off-market leasing deals next to the Mt Barker Homemaker Centre.
“We had more tenant interest than we had space, which clearly demonstrates the increased demand for LFR, as has the success of a Seaford Road project where we’ve leased three of the five available tenancies.
“Many of these new projects are in areas experiencing high residential growth with a mix of new residents, consisting of mainly young families, along with established housing,” Ms Sears said.
It should be noted that there are some headwinds for developers including rising construction costs for developers and interest rate increases. However, Ms Sears belives some LFR sectors will be less impacted than others and that there is still strong continued demand for available leasing opportunities.
