Weaker retail sales growth over the past 12 months and increased competition from larger property owners has sent Sydney’s strip retail market falling with vacancy on the rise, a report from Herron Todd White says.

The Retail Strip Market Link for the second quarter of 2012 shows the biggest increase was in the prime markets. Paddington’s Oxford Street was hit the hardest with vacancy rates rising from 7.4 per cent in June 2011 to 22.3 per cent in June 2012.

Similarly, the high streets of Double Bay have also felt the same pressures.  The redevelopment of Westfield Sydney City and continued pressures of Westfield Bondi Junction are to blame for pushing profit margins of retailers along these strips.

“Given the already high levels of vacancy recorded in 2011, it is clear that a shift is occurring along the once desirable location. Landlords up and down the strip have turned to local TAFE students to create mock shopfront displays, in an attempt to mask the level of vacancy along the strip,” the report says.

As a result, we’re seeing a lot more landlords being forced to aggressively discount on rent to prevent tenant relocations. A review of average rental rates from December 2011 to June 2012 revealed that average rental rates have fallen by as much as 25 per cent.

The one exception to this however has been prime properties within the CBD, which continue to benefit from strong demand. These places include Pitt Street Mall and Westfield Sydney.

The report forecasts vacancy will continue to rise for both primary and secondary markets with predictions that prime properties with Sydney CBD will remain in strong demand for both local and international retailers.