Surging CBD populations changing retail mix

Paul Thornhill reports that the boom in CBD living is shifting the retail landscape in Australia’s cities.

The Australia-wide surge in CBD populations is a bright spot in a retail environment characterised by subdued consumer spending. But developers and retailers should take account of the distinct makeup of CBD residents which is benefitting some sectors more than others.

Nearly all capital city CBD populations have doubled in the last decade. While some of that growth has come from retirees and professional couples, the real driver is international students, mostly from Asia.

That’s led to a significant demographic difference; while catchments for most major shopping centres are dominated by Australian-born families, 47.5% of Melbourne’s city residents are foreign born, with one in ten a Mandarin speaker. In Sydney, 30% of city residents speak an Asian language at home and have an average age of just 28.

“These young overseas students bring a different mindset to the way they shop and eat,” says Jones Lang LaSalle Director of Research and Consulting, David Snoswell.

“They love after-hours shopping and global brands; and their spending habits explain the soaring numbers of Asian eateries, specialist groceries and much of the increase in beauty and nails salons.”

11% of CBD retail properties are let for personal services, according to Savills Victorian Head of Research, Glenn Lampard, with growth focused in the beauty sector, masseurs, gyms, wellbeing centres and tailors.

Fashion is the other big beneficiary with popular global brand retailers like Zara quick to take advantage of more young, globally oriented consumers.

The population growth in cities is rumoured to be tempting Marks and Spencer and H&M to enter Australia. And it makes developments like Sydney’s World Square supermarket feasible, according to Snoswell.

“This type of development would have been marginal at best 15 years ago, but with the size of city catchments today, I expect we will see more of them. It also explains the exponential growth in 24 hour convenience stores and delis over the last decade.”

ABS estimates the City of Sydney’s population has grown to 180,000 and the City of Melbourne to 105,000, with Brisbane (230%) and Perth (125%) recording the fastest growth.

This surge in city populations is forecast to continue but that doesn’t make the outlook for CBD property universally rosy.

Vicki Lekanis, General Manager of inner-Melbourne residential agency Dingle Partners, explains that while her volume of rentals is routinely growing by 35% – 50%, the increase in supply of new apartments has started to catch up with the market.

“Three years ago you didn’t have to do much to rent a city unit, just run an open inspection and hordes of applicants would show up.”

“Now we’re lucky to see two or three parties at an open and they know the market is becoming oversupplied, applying for multiple units and then negotiating the rent down.”

“In inner city property management, we’ve just had our hardest 18 months ever”.