Neighbourhood nation as locals turn backs on CBD

Square has released new research showing a major shift in how Australians dine, spend and socialise. The findings point to the rise of a “Neighbourhood Nation” where Australians are increasingly choosing their local communities over city centres.

Drawing on millions of transactions across Square’s platform and a nationally representative consumer survey, the report shows the CBD is no longer the main economic drawcard. Transactional insights focus on Sydney and Melbourne, Australia’s two largest metropolitan centres, providing a clear lens into broader national trends.

Square data shows that the pandemic may have been a crucial turning point; in the face of restricted mobility, traffic in CBDs fell, while traffic in non CBDs grew. In Sydney, non-CBD transaction volume grew 75.3 percent between 2019 and 2020 while the CBD fell 3.9 percent. In Melbourne, non-CBD areas rose 34.2 percent while the CBD dropped 38.9 percent. Consumer sentiment mirrors this: only 9 percent feel more connected to the CBD than five years ago, while 54 percent feel more connected to neighbourhoods. Two in five visit the CBD less than once a month, and almost one in five avoid it altogether.

The trend has continued into 2025, with suburbs now showing stronger weekend dining traffic, higher loyalty and greater spend than CBD counterparts. In the first half of 2025, suburban venues peaked on weekends, recorded higher average transaction values, and attracted more repeat customers than city businesses.

As more Australians work from home, the suburbs have become the centres of daily life. ABS data shows over a third (36 percent) of Australians worked from home regularly in 2024, reinforcing the role of local cafés, pubs and restaurants as the new hubs of connection.

Australians are also becoming more loyal to their neighbourhood favourites. In Sydney, 4.5 percent of neighbourhood customers made three or more repeat purchases in the first half of 2025, compared to 4 percent in the CBD. In Melbourne, the gap was 4.6 percent in non-CBDs versus 3.8 percent in the CBD. While these differences may look small, they are a clear signal of a growing trend: loyalty is shifting away from city centres and towards local businesses.

“The sellers building the strongest businesses today are those investing in long-term, local relationships. You become part of people’s weekly rhythm when you are their go-to barista, baker or neighbourhood favourite,” said Colin Birney, Head of Business Development at Square in Australia. “Data can play a big role in that too, helping businesses better understand their customers and deliver experiences that keep people coming back. That is how repeat custom and loyalty are built.”

Survey data reinforces the trend. Australians say they now spend 73 percent of their monthly dining budget in local venues, compared to 27 percent in the CBD. Neighbourhood spots are described as more homely (76 percent) and more community-minded (70 percent). Square transaction data shows suburban food and beverage sales peak on weekends, while CBD venues peak at weekday lunchtimes, highlighting the difference between leisure in the suburbs and transactional visits in the city.

The preference for local life extends well beyond dining. Consumers overwhelmingly frequent their neighbourhoods for everyday activities: time with friends and family (87 percent), meeting at cafés (75 percent), shopping with friends or a partner (66 percent), and going to the cinema (64 percent).

Some suburbs are emerging as clear leaders. In Melbourne, The Basin, Parkville, Keilor Downs ranked among the areas with the highest concentration of repeat customers. In Sydney, Avalon, Dee Why, and Willoughby stood out. By contrast, Potts Point and Surry Hills, which sit close to the CBD but outside its core, recorded some of the lowest proportions of repeat customers, while Melbourne’s CBD itself also fell behind surrounding suburbs.

To help reinvigorate inner-city life, local organisers established the Hollywood Quarter in Surry Hills, a cultural and entertainment precinct designed to give people fresh reasons to return to the city while supporting local businesses hit hard by the pandemic.

“Over the past year we have worked closely with local businesses and venues in what is now called Hollywood Quarter to launch events and activations designed to bring people back in and re-energise the precinct,” said Lorraine Lock, District Coordinator at Hollywood Quarter. “It is not just about foot traffic. It is about creating those moments that make people say, ‘I want to be part of this place again.’”

Neighbourhood spend is also consistently higher on average. In Melbourne, the average food and beverage spend was $15.15 in non-CBDs compared to $13.53 in the CBD. In Sydney, the gap was $14.52 in non-CBDs compared to $12.87 in the CBD. These figures could suggest that local outings are longer, more intentional and higher value than city-centre visits, offering neighbourhood businesses the opportunity to build deeper and more sustainable businesses.