News release

Retail spending bouncing back, but leasing challenges to remain

Vacancy rates rising across all retail sub-sectors, but neighbourhood and Large Format Retail remain more resilient, according to JLL

July 13, 2020

AUSTRALIA, 13 JULY 2020 – JLL’s 2Q 2020 statistics show vacancy within shopping centres has risen, despite the re-opening of retail and rebound in foot traffic.

The national average shopping centre vacancy rate increased to 5.1% in June 2020 from 3.8% in December 2019, to the highest level in more than 20 years. Including CBD retail and Large Format Retail, the vacancy rate increased from 4.8% to 6.3%. JLL Research did not count temporary store closures as ‘vacant’ for the purpose of this survey.

JLL’s Head of Retail, Property & Asset Management- Australia, Tony Doherty said, “We’ve seen a rebound in sales and foot traffic at the lowest in April across our managed portfolio of approximately 300 centres, but approximately 5-10% of stores remain temporarily closed across the industry. There is a major operational focus for us on ensuring shopping centres are safe places as social restrictions have lifted in most states.”

“Our team is also working closely with individual retailers on their rental circumstances to help them through this period with a specific focus on applying the principles under the commercial tenancies code of conduct.”

“While the National Code of Conduct for commercial tenancies is providing some structure to tenant-landlord rent relief negotiations for SME’s, the focus for some national retail chains is shifting to more permanent decisions for rationalising their store numbers,” Mr Doherty said.

JLL’s Senior Director of Retail Research- Australia, Andrew Quillfeldt said, “Government stimulus has generally been supportive of business continuity, employment and households, which partly contributed to the rebound in retail sales in May of approximately 16.9% from the low in April (-17.7%).”

However, Mr Quillfeldt said, “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.”

“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. This is likely to drive divergence even further between the performance of prime and secondary quality shopping centres - a trend which has been occurring for some time already.”

The latest figures showed that the commencement of new projects and extensions were the lowest since 2009 at just 22,900 sqm in 2Q 2020, as owners scale back capex programs. Each of the six projects that went ahead in the June quarter were all convenience-based centres anchored by a supermarket.

“Neighbourhood and Large Format Retail centres have been much more resilient, from a foot traffic, sales and rent collection perspective as these sectors have benefited from the boost in sales of food and household goods,” Mr Quillfeldt added.

“Development activity is reducing significantly given the focus on converting existing space. The lower levels of new supply will help rebalance market conditions over the next three to five years.”

“The handing back of space both at a speciality level along with the downsizing of department stores and discount department stores is one of the biggest challenges for owners now. We’re expecting to see an acceleration of the alternate-use conversion theme as owners look to extract value from retail assets, whether it’s a partial or full conversion,” Mr Quillfeldt concluded.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit