AI uptake is set to shape the next phase of data centre growth in Australia, increasing the scale, infrastructure requirements and investment intensity, new CBRE research shows.

CBRE’s Australia Data Centres 2026 report identified AI accelerating demand, power availability, deliverable supply, differentiated asset quality, and selective capital as key themes that will define the next phase of growth for the asset class.

CBRE’s Head of Data Centres Research, Australia, Sass Jalili said while cloud adoption, digitalisation and hyperscale expansion continue to underpin Australia’s data centre expansion, increased AI-driven workloads have introduced a new layer of demand for the sector.

“What is changing is the scale, capital intensity and physical requirements of development,” Ms Jalili said.

“The next phase of growth will increasingly be determined by access to secured power, infrastructure readiness, experienced operators and creditworthy customers. As development requirements intensify, the ability to deliver operational capacity will become an increasingly important differentiator”.

The report notes electricity availability is beginning to broaden location consideration for data centres.

CBRE’s Pacific Director, Data Centres, Darcy Frawley said the optimal location for a data centre increasingly sits at the intersection of power and community support.

“Australia’s data centre footprint remains highly concentrated in Sydney and Melbourne. However, as new campuses require substantially more power and face increasing social licensing issues, strong consideration is being given to where the next frontier of development is.

“Growth opportunities are broadening geographically, with significant expansion planned in Perth, Brisbane and Darwin. In the past nine months we’ve also seen the emergence of regional locations, such as La Trobe Valley and Hunter Valley regions, where scalable power can be secured, sometimes with support from behind the meter generation,” Mr Frawley added (continues below).

The report shows data centres continue to attract significant institutional capital, with direct investment across Asia-Pacific reaching US$11.6 billion in 2025, reflecting the sector’s growing importance as a core infrastructure asset class.

In Australia, the investment opportunity is expected to expand considerably. CBRE’s October 2026 research forecast shows Australia’s investable data centre universe is expected to grow by approximately 90% to A$57 billion by 2030.

Australian data centre operators raised A$35 billion across debt and equity funding in 2026 to early September, up from A$24 billion in 2025.

Mr Frawley noted Australia is one of Asia Pacific’s leading data centre markets underpinned by substantial installed capacity base and strong future development pipeline.

“Capital expenditure by the world’s largest technology companies is accelerating sharply as hyperscalers invest in cloud and AI infrastructure,” he said.

“Australia is increasingly participating in this investment cycle. Major global technology companies are expanding domestic cloud, compute, and AI infrastructure reinforcing Sydney and Melbourne as strategic locations within their regional networks,” Mr Frawley added.

A copy of the report can be found following this link.

The expanding global luxury market is driving growth for the Australian and New Zealand luxury hotel sector with increasing demand, widening rate premiums and limited development pipeline fuelling investment across established assets.

CBRE’s Luxury Hotel Market report found luxury assets are outperforming the wider sector with demand across major Australian and New Zealand markets growing at a 2.9% CAGR since 2019, more than twice the broader hotel market’s 1.3%.

Occupancy across luxury hotels has remained stable at 78%–79% despite new supply. Since 2020, 20 hotels comprising 3,517 rooms have opened across Australia and New Zealand. In Australia, luxury represented approximately 33% of all rooms delivered during the period.

The analysis shows the median transaction price per key increased by 81%, from around $396,000 in 2011–2014 to $718,000 in 2023–2026 year to date.

This growth is attracting new global brands to the market and supporting expansion through conversions, repositioning, branded residences, and independent operating models.

The report shows since 2021, approximately A$3.2 billion in luxury hotel assets transacted across Australia and New Zealand. CBRE advised across approximately A$1.75 billion, representing 55% of total transaction value.

CBRE’s Head of Hotels, Capital Markets, Pacific, Michael Simpson noted international capital has been an important driver of investment.

“These transactions have established new benchmarks for absolute price, price per key and yield, attracting both domestic and international capital. Outcomes have been achieved across different market conditions, from transactions executed during pandemic lockdowns to major sales completed as investment activity recovered,” he said.

“China and Hong Kong investment was particularly active between 2012-2018. Singaporean and Malaysian capital has been steady with a more diversified buyer pool in recent years This depth of offshore interest has supported liquidity and helped establish new pricing benchmarks alongside active domestic capital,” Mr Simpson added (continues below).

CBRE’s Director, Hotel Research, Ally Gibson notes the report analysis shows luxury hotel performance is supporting the pricing outcomes across its transactions.

“Since 2019, luxury ADR increased across every market analysed and premiums over the all-scales sector are widening considerably,” Ms Gibson said.

“In Australia, the average luxury ADR premium over the all-scales sector increased by 53%, from $62 in 2019 to $94 in 2026. Queenstown’s premium rose from approximately NZ$78 to NZ$140, the highest of any market analysed, reflecting its position as a tightly supplied luxury leisure destination.

“Overall, ANZ’s luxury sector is broadening and upgrading. Sydney continues to deliver the strongest major gateway performance at scale and new product is establishing higher rate benchmarks,” she added.

Looking ahead, the report shows 11 ANZ luxury hotels comprising approximately 1,979 rooms are under construction, with most delivery expected in 2026 and 2027.

“Beyond the current development cycle, the confirmed pipeline thins materially as feasibility constraints limit new projects. Strengthening demand and limited new supply should support the performance and value of established luxury assets, particularly in markets with high barriers to entry,” Ms Gibson added.

For a copy of the report, contact: Ally Gibson at: ally.gibson@cbre.com.au.

Supply of Purpose-Built Student Accommodation (PBSA) could increase by one third on current volumes over the next few years if all planned projects proceed, new CBRE analysis shows.

CBRE’s Accommodating the Growth in Students report notes supply is forecast to increase by 34,000 beds across Australia from 2026-2029.

Melbourne accounts for 28 per cent of supply followed by Perth at (22pc) and Sydney (20pc).

While this is an uplift of one third on current supply, there remains a significant pool of unmet demand for PBSA in Australia with a shortfall of approximately 185,000 beds.

One in three Australian students international

Australia’s intake of international students is expected to be broadly flat over the five-year period from 2023-2027. 

Nearly one in three students in Australian universities is an international student. 

CBRE assess the penetration of PBSA is 7pc of students in Australia.

This is relatively low in a global context.  

The report notes since 2022 student accommodation rents have increased substantially, along with a recovery in international student numbers.

CBRE’s Head of Research Pacific, Sameer Chopra notes newer and highly amenitised stock, which students prefer, is providing a boost to average market rents (continues below).

“Student accommodation rents are currently at a 12% premium to rents for two-bedroom apartments in the same precinct,” Mr Chopra said.

“Today, nearly a quarter of PBSA standard suites have rents above $700/week,” she added.

“This used to be a phenomenon in Sydney and Melbourne but we’re seeing similar new stock with higher rents in Adelaide, Brisbane and Perth,” according to the executive.

“The premium rents are explainable as purpose-built student accommodation is usually furnished and offers utilities like electricity and wi-fi, breakfast and coffee facilities, community and social activities, safety and security like CCTV and card swipe access, as well as amenities including gym and study areas”.

Brisbane rent growth pacing high

CBRE assess the median rent for a sample of student accommodation studios in Sydney and Melbourne properties grew at CAGR [compound annual growth rate] 5pc over 2018-2026.

During 2026, national rent growth was low single digit, with Brisbane pacing higher than Melbourne and Sydney.

CBRE Director, Living Sectors – PBSA, Valuation and Advisory, Rosie Young notes cap rates for PBSA assets in Australia have been broadly stable over the past 18 months, despite the volatility in interest rates which impacted other sectors.

“Whilst there have been some operational challenges facing the PBSA sector this year with the introduction of increasingly tenant friendly legislation, making it easier and cheaper for tenants to terminate agreements early, yields have proven to be surprisingly resilient despite the higher rate environment…investors are taking a long-term view with the fundamentals of the living sector and PBSA still proving highly appealing,” Ms Young said.

For a copy of the 20-page report contact Sameer Chopra at sameer.chopra@cbre.com

With more than 21.6 million registered vehicles and net overseas migration of approximately 300,000 people annually, Australia’s automotive services sector is delivering one of the most resilient income streams in commercial property, according to CBRE’s June 2026 Automotive Intelligence Report.

The report shows private investors are increasingly targeting tyre retailers, service centres and auto parts assets, supported by 10-year net leases, fixed annual rent increases of 3–4% and tenants backed by ASX[1]and NYSE-listed parent companies.

Yields have remained stable despite elevated interest rates, with metropolitan assets pricing between 4.14% and 5.82%, while regional markets offer up to 120 basis points of additional return.

Activity is being led by Queensland, which accounts for 44% of national transaction volume since 2024, reflecting strong population growth across South East Queensland and continued expansion of suburban, car-dependent catchments.

Jesse Lapham, Head of Private Wealth Research at CBRE, said the sector’s performance is underpinned by structural demand.

“The size of Australia’s vehicle fleet is a critical driver. As the number of vehicles continues to grow, so too does the need for consistent servicing, parts and maintenance, supporting long-term tenant demand.”

Mr Lapham said the sector also offers a rare combination of accessibility and covenant strength.

“The market is dominated by a small number of national operators backed by listed parent companies.

For investors, that provides institutional-grade tenants at price points that remain accessible to private capital, alongside long leases and built-in rental growth,” (continues below).

The report highlights strong long-term fundamentals, with Australia’s population forecast to reach 32 million by 2035, alongside an additional 2.9 million workers and rising household incomes.

“That growth is concentrated in suburban markets where car dependency is highest. As the population expands, so too does the size of the fleet, directly supporting long-term demand for servicing, parts and tyre retail,” Mr Lapham said.

Mr Lapham said shifting policy settings are also increasing investor focus on the sector.

“As residential policy headwinds redirect capital into commercial markets, we’re seeing growing competition for well-located automotive assets with long leases and strong tenant covenants.”

On electric vehicles, Mr Lapham said the transition remains supportive of the investment case.

“EVs still require regular servicing across tyres, brakes, suspension and air conditioning, and tend to wear tyres more quickly. Fleet size matters more than drivetrain mix, and that fleet continues to grow”.

For a copy of the report, contact: Jesse.Lapham@cbre.com.

Australia’s healthcare leasing market is emerging as one of the most resilient and tightly held real estate sectors, underpinned by strong population growth, rising healthcare utilisation and a shortage of new, fit-for-purpose medical facilities.

CBRE found that tenant demand across medical, allied health and specialist operators continues to deepen. However, escalating construction costs, extended planning timeframes and tighter funding conditions have materially reduced the number of new healthcare developments commencing construction nationwide.

As a result, projects that achieve sufficient pre-commitment and progress through to delivery are being met with heightened tenant and investor demand.

“Pre-commitment has become a defining factor in today’s healthcare development cycle,” said Kai Wang, Senior Negotiator at CBRE.

“Operators are making earlier leasing decisions to secure space within new facilities, particularly where projects are aligned with population growth, transport infrastructure and established health precincts.

“Construction costs have escalated sharply since 2020, while higher interest rates and more conservative lender requirements have forced many proposed projects back to the drawing board. This has intensified competition for high-quality new buildings, particularly within established and emerging health precincts anchored by major hospitals.”

One example is the seven hectare Epping Health Hub (artist’s impression, top) in Melbourne’s north. Construction commenced in March 2026 after surpassing a 35 per cent pre-commitment threshold, securing anchor tenants Icon Cancer Centre and Lumus Imaging alongside a mix of GP and specialist operators.

“Healthcare assets are benefitting from a fundamental supply-demand imbalance,” said Sandro Peluso, National Director, Australian Healthcare & Social Infrastructure at CBRE (continues below).

“With build costs increasing significantly in recent years and fewer projects progressing, the limited number of developments that do proceed are capturing leasing momentum much earlier in the cycle.”

Major hospital-led precincts continue to generate the strongest leasing enquiry. The New Footscray Hospital, currently under development as part of Victoria’s largest health infrastructure investment, is acting as a key catalyst for surrounding medical and allied health activity.

“Hospital precincts remain the gold standard for healthcare demand,” Mr Peluso said.

“Assets located within or adjacent to these precincts offer long-term relevance and tenancy depth that is increasingly difficult to replicate.

“We’re seeing the strongest demand for assets that provide flexible floorplates, modern building services and proximity to major transport and hospital infrastructure. Projects that meet these criteria are achieving faster lease-up and attracting stronger tenant covenants, reinforcing their appeal to both developers and long-term investors.

“With development pipelines remaining constrained, CBRE expects competition for newly delivered healthcare assets to remain elevated—particularly across Melbourne’s growth corridors and established health precincts—supporting leasing outcomes, asset values and long-term investment performance.”

Swathes of office space are set to be removed from CBDs across the country in the next five years in a move that’s been dubbed “the great withdrawal”.

Led by Sydney, it’s one of the lesser-known trends set to drive Australia’s office market recovery, according to a new CBRE research report.

CBRE Research Manager Thomas Biglands noted, “There is now reason to believe that vacancy rates in most Australian markets have reached their cyclical peaks as leasing activity gathers steam, more workers return to offices and new construction remains on the backburner. A less talked about factor has been the anticipation of significant levels of inventory withdrawals, which are likely to be well above historic levels in most CBD markets, helping to drive vacancy rates down.”

The Sydney CBD is at the forefront, with CBRE identifying 241,336 sqm of office space that could be withdrawn from the market by the end of the decade – representing 4.6% of the city’s existing office inventory.

That’s a significant shift in a city where new supply has typically far outweighed withdrawals.

Based on CBRE forecasts, new Sydney CBD supply will be down 61.2% over the next five years compared to the trailing five-year period, while withdrawals will be up 92.6%.

Some office stock is set to be permanently withdrawn as these buildings are converted or redeveloped for an alternative use such as apartments or hotels. These building are all outside the CBD Core in the city’s Midtown, Western Corridor, and Southern precincts, which have been hardest hit by a tenant flight-to-quality migration.

Temporary withdrawals are also on the cards, involving sites that are earmarked for new office towers. Given new construction can take five or more years, these withdrawals will still have a material impact on vacancy rates and rental growth, Mr Biglands said.

These building are all in either the city Core or the northern end of the Midtown precinct – the only areas of the CBD where new office development is feasible given the current construction climate.

Potential withdrawals are also included in CBRE’s figures, involving existing office properties which have mooted redevelopment plans.

Office space in these buildings is still available but the leases are either short term or include demolition clauses, with the projects not likely to move forward until later in the decade.

CBRE’s report notes that additional withdrawals are also highly likely in the coming years.

“The ongoing bifurcation between Prime and Secondary office leasing fundamentals has resulted in a significant pool of struggling lower grade assets in the more challenged precincts and submarkets across Sydney,” Mr Biglands said.

“While these properties are struggling to compete as office assets, fundamentals in other property sectors are more compelling. Market dynamics in residential, hotels, education, and data centres sectors are all much stronger than for secondary office at present.”

CBRE Office Leasing Director Chris Hanley believes the withdrawal trend will change the game for lower grade and less active Sydney CBD submarkets.

“Tenants in these lower grade assets are usually on very cost-effective terms so they’re unlikely to trade up to prime grade stock,” Mr Hanley said.

“If we look back to the last cycle, withdrawals associated with residential conversions sent B-Grade and lower A-grade rents sharply higher and this may play out again if all the withdrawals are realised.

“We are already seeing a significant uplift in enquiry across Midtown and the Western Corridor as value-seeking tenants start to seek relocation options as leases in buildings like 175 Liverpool Street and 338 Pitt Street approach expiry. Quality stock with existing fitout is moving very quickly and availability of this product is getting thin.”

CBRE’s report notes that the withdrawal of 50,000 sqm of office space equates to circa 1.0% of vacancy rate tightening – highlighting the major impact that the withdrawal trend could have.

The current CBRE base case forecast for the Sydney CBD is for the overall vacancy rate to declining from 12.8% as of year-end 2024, to 9.1% in 2032 when the next major wave of new supply is expected.

However, the vacancy rate could shrink to as low as 5.4% by 2032 if all the identified withdrawals proceed, or 7.0% taking a more conservative view that only the permanent withdrawals will proceed.

For a copy of the report, contact CBRE’s Tina Liptai at tina.liptai@cbre.com.

The Australian seniors living sector is a rapidly evolving industry driven by the aging population, government policies, and growing demand for more flexible and diverse living options for older Australians.

With the increasing number of people aged over 65, the sector has seen significant growth and transformation over recent years.

As well as highlighting recent sales and trends in the market, the latest CBRE Senior Living report explores three key segments of the sector: aged care, retirement living, and land lease communities.

1. Aged Care

Aged care in Australia provides a range of services designed to support older individuals who can no longer live independently.

The sector is essential due to the increasing number of Australians aged 65 and over.

By 2050, it is estimated that one in four Australians will be over the age of 65, placing substantial pressure on aged care services.

Increases in construction costs have also impacted the aged care sector disproportionately compared to other sectors, with additional compliance requirements seeing average development costs per bed of $400,000–$450,000.

The aged care system in Australia is a mix of government-funded services, private facilities, and not-for-profit organisations.

Aged care services range from home care packages to residential aged care facilities.

The federal government plays a critical role in funding and regulating the sector, with the Department of Health overseeing the delivery of services.

Key Trends:

• Home Care Packages: There has been a growing preference for home care services, allowing seniors to remain in their homes for as long as possible. These packages provide funding for personal care, nursing, domestic assistance, and other services, helping to delay or prevent the need for residential care.

• Residential Aged Care: The demand for residential care continues to rise, particularly as the population ages. However, the industry has faced significant challenges, such as staffing shortages, regulatory changes, and concerns about quality of care, which have been highlighted in reports such as the Aged Care Royal Commission.

• Regulatory Changes: The Aged Care Royal Commission, which concluded in 2021, resulted in a series of recommendations aimed at improving care standards, including increased funding, better staff training, and greater transparency. The implementation of these recommendations is expected to reshape the aged care landscape.

2. Retirement Living

Retirement living refers to housing options designed for older adults, typically aged 55 and above, who are generally independent but prefer the security and convenience of living in a community tailored to their needs.

Retirement villages can include independent living units, assisted living services, and community activities that promote social interaction and engagement.

In Australia, the retirement living market is highly diverse, ranging from smaller, local villages to larger, resort-style developments.

The sector has grown as more Australians choose to downsize and seek more manageable housing options as they age (continues below).

Key Trends:

• Upscale Retirement Living: Over the past decade, the demand for high-quality retirement communities has increased. These developments offer luxury amenities such as pools, gyms, and on-site healthcare, appealing to wealthier retirees looking for a comfortable lifestyle. These communities often provide a range of additional services, including health care and recreational activities, enhancing the appeal to affluent retirees.

• Aging in Place: Many retirement villages are adapting their models to accommodate residents who may need increasing levels of care over time. These villages are integrating more flexible care services, such as home care and assisted living, allowing residents to stay within the same community for longer.

• Financial Models: One key aspect of retirement living is the financial model used for the properties. Typically, residents purchase the right to live in a retirement village, often through a leasehold arrangement or a “loan for lease” structure. As the market matures, new models, such as shared equity and rent-to-buy schemes, are emerging to make retirement living more accessible to a broader range of seniors.

3. Land Lease Communities

Land lease communities are a unique form of seniors living in Australia.

These communities consist of privately owned land on which residents lease their homes.

This model allows seniors to purchase a manufactured or modular home while renting the land it sits on.

The homes in land lease communities are typically more affordable than traditional retirement homes and offer greater flexibility for the resident.

Land lease communities are becoming an increasingly popular option for retirees seeking more affordable housing, particularly as the cost of traditional retirement living options continues to rise.

These communities often provide residents with a sense of ownership, while also benefiting from the shared services and social activities typical of retirement villages.

Key Trends:

• Affordability: The affordability of land lease communities is a key factor in their growing popularity. Many retirees are drawn to these communities due to the lower upfront costs compared to buying a house or even purchasing a retirement village unit. The ongoing rental payments for the land are generally more affordable than purchasing a traditional home.

• Regional Growth: Many land lease communities are located in regional and coastal areas, attracting retirees looking to downsize and live in more relaxed, scenic environments. This trend has accelerated due to the rise of remote working and a desire to escape crowded cities.

• Sustainability and Innovation: Some land lease communities are adopting sustainable building practices and providing eco-friendly homes. With an increasing focus on environmental impact, these communities are appealing to a more eco-conscious senior demographic.

Evolving sector

The Australian seniors living sector, comprising aged care, retirement living, and land lease communities, is undergoing significant transformation.

As the population ages, the demand for housing and services tailored to older Australians will continue to grow, creating a dynamic market with evolving investment opportunities.

Recent sales and trends in each segment reveal that the sector is attracting substantial investment, signalling its long-term potential.

However, the challenges of affordability, regulatory compliance, and care standards remain important factors that will shape the future of this critical sector.

For CBRE’s Seniors Living report, contact Marcello Caspani-Muto at marcello.caspani-muto@cbre.com.au.

There is no end in sight for rising apartment rents, with five Australian markets likely to record mid to high 30% rental growth between now and 2028, according to new CBRE forecasts.

CBRE’s Apartment Rent and Vacancy Outlook examines 53 precincts in Australia’s major capital cities.

Median rents for two-bedroom apartments across these precincts are expected to grow by $120/week (+26%) between 2023-2028, underpinned by a further decline in city vacancy rates from the current average of 1.8% to just 0.8% – around one-third of the previous decade average.

The highest growth of +30% is expected to occur in five markets: Sydney’s Eastern Suburbs, Parramatta, Melbourne North, Perth City and almost all precincts in Brisbane.

CBRE’s Pacific Head of Research Sameer Chopra noted, “At the start of 2013 just four precincts in Australia had an average rent of over $600/week for two-bedroom apartments, being the Sydney and Perth CBDs, Sydney’s Eastern Suburbs and Sydney’s Lower North Shore. By June this had grown to 20 precincts and by 2028 we expect 38 precincts – or over 70% of Australia’s two-bedroom apartments – to have a rent exceeding $600/week.”

Tightening vacancy rates have been a major driver, with Mr Chopra noting that vacancy rates need to be around 4%-5% for markets to be in balance.

To stave off further falls in vacancy rates ~75,000 of new apartments per annum would need to be delivered across Australia to keep pace with population growth.

But supply is lagging with CBRE forecasting new stock will be ~60,000 in 2024 and 2027 – 40% below the previous peak in 2017 and near decade lows (item continues below).

Notwithstanding the outlook for rents and vacancies, Mr Chopra said he still expected the cost of renting to remain more affordable than purchasing across Australia’s major cities.

“Australia’s monthly apartments rents are currently 30% cheaper than purchasing at current prices across most precincts. The reversion of interest rates to say 2%-2.5% could see this relative rental affordability remain as capital values rise.”

Eastern seaboard outlook

Sydney:  Apartment delivery to average 14,000 pa over 2024-28, well below 33,000 pa demand for housing stock. Vacancy rate is set to fall from 2.2% to 0.8% and average rent growth of 6% pa to 2028.​

Melbourne:  Apartment delivery to average 10,000 pa over 2024-28, nearly 40% below Sydney. Demand for housing stock (apartments and communities) is likely to average 38,000 pa over the next five years. This should continue to drive down city-wide vacancy from 1.7% to 0.9%.​

Brisbane:  Apartment delivery to average 6,500 pa over 2024-28. Demand for housing stock (apartments and communities) is likely to average 16,500 pa which will drive down city-wide vacancy from 1.1% to 0.8%.​

For a copy of the 19 page report, contact Craig Godber at: craig.godber@cbre.com.

While Australia’s CBD retail vacancy rate rose in the first half of the year current enquiry levels suggest the market has bottomed out, particularly in Sydney where a relatively quick recovery is anticipated.

CBRE’s H1 CBD Retail Vacancy report highlights that the national vacancy rate softened from 13.9 per cent in H2 2022 to 15.0pc in H1 2023.

It was a mixed bag, with vacancy declines recorded in Perth and Adelaide while increases were clocked in Sydney, Brisbane and Melbourne.

CBRE Research Analyst Darcy Badgery noted, “Overall vacancy has softened nationally, coming off seasonal highs in H2 and lower spending, however rising office occupancy rates and the return of international tourists and students has increased visitation. We’re also seeing a national flight to quality trend, with our latest Live, Work, Shop survey highlighting that 61pc of retailers want to increase the quality of their store locations.”

The biggest H1 vacancy decline of 0.77pc was recorded in Adelaide, with a 0.74pc tightening in Perth.

While Melbourne’s vacancy increased by 0.8pc, the city now has the lowest vacancy in the country at 10.7pc.

This followed a 2.49pc increase in Sydney’s vacancy rate to 10.8pc.

A vacancy increase was also recorded in Brisbane (+1pc to 19.5pc) .

CBRE’s Australian Head of Retail Leasing Leif Olson noted, “While the overall national vacancy rate has increased, based on current enquiry levels we expect to see vacancies contract across all markets over the next six months. This is particularly the case in Sydney, with deals pending several large arcade vacancies and strong enquiry from food & beverage and luxury fashion retailers who are seeking new opportunities.”

AROUND THE GROUNDS

Sydney

Despite overall vacancy softening, strip retail vacancy tightened significantly, dropping 3.19pc to 6.9pc.

This followed a surge in leasing deals in prime locations to brands including Adidas, NBA and JD Sports and continued activity by luxury retailers seeking to open flagship stores to remain competitive.

The overall CBD increase was attributable to a 406 basis point vacancy rise in arcade retail space and a 320bps rises in centre vacancies, largely due to tenancies becoming available following the refurbishment of the General Post Office coupled with difficulties in leasing upper-level retail centre tenancies.

CBRE’s report forecasts that increases in international visitor numbers, returning international students and a growing number of CBD events are expected to continue to boost city visitation and overall retail spending.

Melbourne

Melbourne’s H1 vacancy softened slightly after the traditional trend of tightening vacancy leading up to the Christmas and holiday period.

In line with Sydney, the softening was led by centres and arcades – particularly upper-level stores, as retailers gravitated towards prime strip locations.

CBRE Associate Director, Retail Leasing, Jason Orenbuch noted that Melbourne’s strip vacancy tightened by 42bps to 10.5pc, with takeaway food outlets filling many of the vacancies to meet demand as office occupancy rates rise and international students return.

“Occupiers in the hospitality sector are also seeking out partially or fully fitted out space in hospitality hotspots such as Flinders Lane and Swanston Street,” Mr Orenbuch said. “There was also an uptick in the development of new stores in H1, which will draw new retail additions to the city and help lift CBD visitation.”

Brisbane

Brisbane’s overall CBD vacancy rose 1% to 19.5% primarily due to a rising number of empty shops in the CBD’s shopping centres and arcades.

Set against this, CBRE Associate Director, Retail Leasing, Tanaka Jabangwe said there was high demand from national and international retailers for super prime stores on the city’s retail strips.

“This was highlighted by Louis Vuitton’s move to a new mall location in the NAB Heritage Building, which is double the size of its previous store in Queens Plaza,” Mr Jabangwe said.

“The demand for flagship outlets is being fueled by workers returning to the CBD and a resumption of international tourism, as retailers tap into the continued demand for experience-based, physical stores.”

Mr Jabangwe said hospitality retailers were also driving demand for strip retail stores to cater to Brisbane’s growing number of inner-city residents. This resulted in a range of new lease commitments in the first half of the year, including Maru Grill on Mary Street, La Boca on Edward Street and Scugzini on Adelaide Street.

“The city’s vacancy issues are primarily associated with upper-level centre tenancies as retailers gravitate towards strip retail locations. An example involves Glue moving out of its store above JD Sports on Elizabeth Street to a new mall location early in 2023,” Mr Jabangwe noted adding that centre tenancies with street exposure continued to attract demand.

Adelaide

Adelaide’s CBD retail vacancy contracted 77bps to 12.4pc in H1 following a very significant drop of 371bps in H2, 2022.

CBRE Retail Leasing Executive Scott Chow said activity in the CBD had been heightened by the reintroduction of major events including the Adelaide Festival in March 2023, in addition to a resurgence in travel-related retail expenditure.

“Demand for retail space on Rundle Mall continues to run high, particularly from luxury retailers, and with space being tightly held we’ve seen interest from high profile tenants in space around the western end of the mall, which has historically seen high levels of vacancy,” Mr Chow said.

“This comes off the back of major international brands like Uniqlo opening flagship stores in Adelaide and highlights the ‘flight to quality’ and ‘experiential’ retail trends being evidenced across the country.”

The vacancy in Adelaide Arcade remained at 0pc in H1 – the lowest rate in the country. A recovery in office worker lunch time spending has also been evident, lifting food retailing activity.

Perth

Perth’s CBD retail vacancy has continued to steadily decline, dropping by 74 basis points in H1 to 25.4% – the lowest level in two years.

CBRE Senior Director & WA Head of Retail Fred Clohessy said retailer/tenant interest and enquiry was re-established in late 2022 when confidence returned in travelling to and from Perth following border closures.

“This has carried into 2023 and continued to break down the CBD’s high retail vacancy rate,” Mr Clohessy said, noting that the strip retail vacancy rate dropped 31bps to 25.4%.

“The addition of retailers such as Sunglass Hut and Peter Jackson on the Hay Street Mall have helped to reduce the city’s strip retail vacancy rate, with Murray Street Mall continuing to be tightly held.

“Demand for prime space from luxury brands is having a positive effect on rents and future vacancy levels. However, rents are still correcting on Hay Street Mall and in secondary locations where vacancy is concentrated, and higher incentives are being sought by retailers.”

CBRE’s report also highlights that Perth’s high office occupancy levels post-COVID has increased demand for lunch and dinner venues in sections of the CBD.

Mr Clohessy noted that the return of events, tourism international students, and WA’s strong economic climate provided a continued base for further vacancy declines over the remainder 2023.

For a copy of the Australian CBD Retail Vacancy 1H 2023 report, contact: darcy.badgery@cbre.com

A travel evolution sparked by the pandemic is driving the growth of Australia’s boutique hotel market, amid heightened demand for unique and hyper-personalised hotel stays.

While boutique hotels have traditionally achieved lower occupancies, room rates and revenues than their larger, international rivals the tables have turned according to new CBRE Viewpoint, which highlights a significant shift in domestic travel demand.

CBRE’s Australian Head of Hotels Research Ally McDade said an analysis of market performance showed that boutique properties had outperformed ‘big box’ international hotels since the 2020 onset of the pandemic across all three key performance indicators – occupancy, Average Daily Rate (ADR) and Revenue Per Available Room (RevPar).

On a RevPar basis, the basket of boutique hotels studied by CBRE performed over 50 per cent better, with occupancy rates and ADR being 21pc and 27pc superior to the luxury international hotels in the analysis.

“The pandemic dramatically changed how and why we travelled. International borders shut down, leisure-based tourism was restricted to local demand and corporate travel was reduced to historically low levels,” Ms McDade said.

“Over two years on, many of the resulting trends such as remote working and virtual conferencing, ‘staycations’, and the continued growth of social media use for destination ‘collecting and bragging’, have become imbedded in our lifestyles, shifting guests’ preferences towards a highly personalised and hybrid approach to their hotel stay experience,” Ms McDade added.

“This travel evolution is being increasingly met by the rise of the boutique hotel culture with its intimate and sophisticated offering and attention to design detail”.

While traditional big box international hotels have always been heavily favoured by corporate travellers and international visitors, CBRE’s Viewpoint notes that the recovery of Australia’s visitor economy has been driven by domestic, leisure-based tourism (story continues below).

“The growth of this local traveller has resulted in demand for a curated hotel offering, which is being met by Australia’s new wave of boutique hotels that blend intimacy and sophistication, and authentically resonate with the feel of the city being visited,” Ms McDade said.

Ms McDade added the strong performance of the boutique sector also reflected new properties entering the market at higher ADR thresholds as well as the ability to drive rates harder on properties with smaller room counts relative to traditional large, luxury hotels.

However, it’s not time to write off the larger hotel chains amid a continued recovery in corporate/MICE travel and a resurgence in international tourism – both of which typically favour big box international properties.

“The continued recovery of corporate travel and international arrivals, coupled with more Australian’s travelling abroad, will broaden the mix of hotel business demand and ultimately moderate the exceptional outperformance we’ve seen from the boutique sector in the past two years,” Ms McDade said.

“The continued growth of boutique hotels in Australia will rely on their ability to deliver a personalised offering, while capitalising on new and emerging travel trends such as bleisure, where a leisure component is added to a business trip; workations, where some work is tacked onto a holiday, and dog friendly travel such as Ovolo’s V.I.Pooch stays.

“Social engagement, forward-thinking tech and an increased focus on eco-friendliness are also expected to play a role in catering to an ever-increasing demand for hyper-personalised hotel stay, which boutique hotels are well placed to deliver due to their smaller size and independent operational structure”.