What’s driving Adelaide’s strong retail supply pipeline?

Nearly 13,000sqm of new space was completed in the last six months.

The retail supply pipeline in Adelaide is expanding, and JLL said in a report that this was driven largely by ongoing greenfield residential community development. Over the last six months, three new neighbourhood shopping centres have been completed, adding 12,800 sqm of consumer staples-oriented retail to stock.

“There is approximately 43,500 sqm of retail space currently under construction, 18,400 sqm short of one of the largest supply waves in the Adelaide market that was recorded the previous quarter,” the report said.

Here’s more from JLL:

Average rents across all sub-sectors were broadly stable, with minor growth over the quarter. Incentives remain a key lever in lease negotiations with national retailers. Retailer demand for space remains resilient.

Yields across most sub-sectors were unchanged over the quarter, except the CBD and regional sub-sectors which decompressed 12 to 25 bps. It is expected that the yield decompression cycle that commenced in 2022 will persist over the balance of 2023.

Outlook: Decreasing consumer spending to increase vacancy risk

As a result of potential further interest rate hikes, vacancy risk in enclosed centres with exposure to discretionary retailing is expected to increase over the medium term as consumer purchasing power decreases.

Over the next 12 months, investor demand for defensive retail assets like neighbourhood centres and stand-alone supermarkets is expected to increase. The wave of sub-regional and CBD centre supply anchoring new residential communities in Adelaide is expected to provide investors with opportunities for potential off-market approaches to owners, which may, in turn, increase investment volumes.

Note: Adelaide Retail refers to Adelaide's overall retail market.