Real estate agency CBRE says retailers must harness creativity and innovation if they are to increase their wallet share, while landlords need to recalibrate their offerings in response to changing market conditions.
The company's Q1 Retail MarketView found 65,000sqm of new CBD retail supply is slated nationally in 2019, representing the largest annual total since 2014.
The majority of new supply will be in Sydney (52,000sqm), followed by Melbourne (9,000sqm) and Adelaide (5,100sqm).
"While CBD retail remains more insulated from headwinds than shopping centres, there is an increasing need for landlords to be more creative in repositioning their assets to secure tenants," says CBRE's head of logisics and retail research Kate Bailey.
"In Sydney, David Jones' refurbishment of its Elizabeth Street flagship store (39,000sqm) is the main development in the pipeline.
"Increasing its product mix towards luxury, beauty, shoes and food, the department stores' refreshed offering is indicative of wider CBD trends nationally."
CBRE's Victorian director of advisory & transaction services - investor leasing, Zelman Ainsworth, says retailers are diversifying their offering by experimenting with store formats in CBD locations around the country.
"The CBD retail landscape is evolving, with more retailers looking at how they can readjust their footprint to leverage the more populous metropolitan markets," says Ainsworth.
"An example of this is Ikea's new small format store a digital format store spanning less than 100sqm.
"This trend isn't an anomaly, with the majority of other traditional large format retailers now leaning on technology and logistics to reduce the typical large format stores allowing them to bring their retail networks closer into the CBD, where the density is."
Ainsworth pointed to small format metropolitan stores built by Bunnings over the years, while "Baby Bunting, Woolworths, Coles and David Jones are other major retailers transforming their retail networks in line with the rise of inner-city apartment living".
CBRE's head of retail leasing for Australia, Leif Olson, says with the increasing digitalisation of retail, these retailers are opening more doors in the country's major CBDs.
"Not only have tenancy mixes changed significantly over the past five years, with a more concentrated focus on food & beverage and entertainment, traditional retailers are focusing more on their store size and getting more productivity out of their spaces," says Olson.
"We are seeing car brands, hardware and small format supermarkets making a push into cities, which we haven't previously seen."
Olson also observes an increasing focus on activation of under-utilised spaces such as basements and building entry lobbies.
"Highlighting this, Kyko Group refurbished its building on the corner of King and Elizabeth streets in Sydney, allowing premium international brand Acne Studios take a prime corner with high exposure," he says.
"Another example of this is 4 Bridge Street in Sydney, with the landlord capitalising on the increasing demand for boutique food & beverage in the CBD by converting the former hair salon to a restaurant, accessed via the rear lane."
Business News Australia
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