Adelaide our safest CBD, while Brisbane and Sydney rank as the riskiest for business

Adelaide has emerged as the Australian capital with the most resilient CBD in terms of business risk, while Sydney and Brisbane are languishing, according to new data from credit-reporting bureau CreditorWatch.

The data, which has been gathered from CreditorWatch’s Business Risk Index, reveals that Perth has also rebounded strongly to pre-COVID levels, meaning that “it is a relatively safer location for businesses now”.

Brisbane has emerged as the riskiest CBD in Australia for businesses to trade in, followed by Sydney, both of which recorded a sharp drop in their ratings over the past four years.

In comparison, CreditorWatch describes Melbourne as an “interesting case” as it posted the second-biggest gain in this year’s rankings.

“Despite drastically long lockdowns during the pandemic, the CBD has bounced back strongly,” the report says.

“Melbourne CBD has moved up the index which, again, means it is a less risky location to operate a businesses versus pre-COVID times.

“Foot traffic in Melbourne has returned to pre-COVID levels, however the timing has changed, with weekends now busier than most weekdays.”

The report notes that Melbourne’s CBD is still experiencing fewer office worker visits than pre-COVID, “but this is being offset by more leisure visitors both during the week and on weekends”.

Adelaide, Perth and Melbourne all have improved their risk rankings in February this year compared with February 2020.

Melbourne, which had the highest ranking for business risk in February 2020, has moved up from 29.5 to 32.8 this year.

Sydney had the sharpest decline over the past four years, falling from 34.6 to 23.8, while Brisbane is languishing at 20.8, down from 30.4.

Adelaide previously led the index at 67.5 and this year edged up to 68.4, ahead of Perth at 55.5 (up from 45.5).

However, the business risk rankings at the top and bottom are at odds with the latest office vacancy rates in the respective capitals.

While Adelaide leads the pack in the CreditorWatch business risk index, the city recorded the largest jump in office vacancy rates for the six months to January - rising from 17 to 19.3 per cent.

Brisbane, which saw office vacancies lift marginally by 0.1 percentage points, still retained the lowest office vacancy rate of any state capital at 11.7 per cent.

The CreditorWatch report notes that Adelaide was one of the cities least impacted by lockdowns and suffered the least from the international tourism downturn.

“Adelaide CBD businesses have long been reliant on their domestic residents and workforce, and the numbers of these haven’t changed dramatically since before COVID-19,” it says. 

“Commercial rents and property prices in the Adelaide CBD are also relatively affordable, and this has also helped businesses since interest rates have risen, relative to other CBDs. Residents also benefit from relatively low residential property prices and rents.”

The report surmises that Brisbane's CBD is “unique” due to large tourism drawcards to the north and south – namely the Sunshine Coast and Gold Coast.

“Both areas act to draw tourists away from the CBD, particularly on weekends and school holidays,” it says.

“The Sydney CBD has much higher office vacancy now versus pre-COVID times, meaning fewer office workers, as well as many more office workers working from home a few days a week, particularly on Mondays and Fridays.”

The report also notes that that while Sydney has had a similar number of concerts as Melbourne, most of the bigger events are held at the Olympic Park venues, “well away from the CBD”.

Major events held in either Melbourne's CBD or inner-city suburbs include the Australian Open, the F1 Grand Prix, AFL, and cricket matches and concerts at the MCG, Rod Laver Arena and Marvel Stadium.

“Sydney CBD also has very few residents able to sustain businesses when office workers are not there,” the report says.

Perth’s lift in the index has been supported by the state’s resources sector.

“The economy of WA is performing remarkably well thanks to the strength of the mining industry, and much like the Adelaide CBD, it is domestic workers and visitors that sustain Perth CBD businesses,” says the CreditorWatch report.