Only 9 percent of Aussies feel connected to CBDs anymore. Colin Birney from Square shares six strategies to help businesses win in the neighbourhood economy.
What’s happening: Australia is becoming a neighbourhood nation, with only 9 percent of Australians feeling more connected to the CBD than five years ago, while 54 percent feel more connected to neighbourhoods.
Why this matters: The preference for neighbourhood businesses extends beyond dining to shopping, entertainment, and social activities. Neighbourhood venues are described as more homely (76 percent) and community-minded (70 percent), with significantly friendlier staff and more personalised service.
Australia is becoming a neighbourhood nation, where consumers are often favouring local neighbourhoods for everything from dining and shopping, to spending time with friends and family.
According to a recent study by Square, only 9 percent of Aussies feel more connected to the CBD (Central Business District) than five years ago, while well over half (54 percent) feel more connected to neighbourhoods. City centres appear to be losing their shine, with two in five visiting the CBD less than once a month, and almost one in five avoiding it altogether.
And Australians are more loyal to neighbourhood favourites: data from millions of transactions shows that, 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.
For restaurants and small businesses, these shifting behaviours are having a direct impact on revenue opportunity. Consumers, for example, now spend 73 percent of their monthly dining budget in local venues, compared to just 27 percent in the CBD.
The preference for local life extends well beyond dining. Consumers overwhelmingly frequent their neighbourhoods for everyday activities: time with friends and family (87 percent), shopping with friends or a partner (66 percent), and going to the cinema (64 percent).
Neighbourhood’s secret sauce
Neighbourhood businesses seem to have a secret sauce over their CBD counterparts that goes beyond just location and convenience. It’s the way they make customers feel from the moment they walk through the door to the moment they leave. Square’s research revealed that neighbourhood spots are described as more homely (76 percent) and more community-minded (70 percent).
Consumers also ranked neighbourhood restaurants considerably higher on most key customer experience indicators, including friendlier staff (61% versus 12%), being more likely to know customers’ names (57% versus 8%) and order (54% versus 11%), and welcoming atmosphere (67% versus 13%).
While it’s true that the data suggests that neighbourhood restaurants and businesses have a leg up on the CBD when it comes to community centred customer service, it’s slightly more nuanced than that. Square transaction data points to suburbs being more about leisure and cities more transactional, with suburban food and beverage sales peaking on weekends, while CBD venues peak at weekday lunchtime. As such, not all CBD customers are looking for the same experience when dining in the city, and restaurants that are predicated on fast service and convenience, like QSRs, may be more likely to thrive in CBD environments.
Community is currency
For neighbourhood restaurants and small businesses, community is currency. For example, when eating at a full service, sit-down restaurant, Aussies value a local, community feel; a focus on food and culture not aesthetics; and using local, seasonal ingredients. Venues with these attributes were beaten only by local neighbourhood restaurants that are convenient and close to home, which ranked number one. Here are some ways businesses can put community at their centre:
- Be the pulse of your community: Businesses that put community and culture at the heart of their offering are likely to draw a crowd, and keep them. Whether that’s through facilitating community events, being active and present at local markets, collaborating with other local small businesses, or championing local producers and suppliers – making your community the beating heart of your brand can have significant rewards.
- Double down on marketing: Driving community centricity can also come through doubling down on marketing efforts, using payments data to spot evolving trends and customer preferences, and ensuring you’re engaging with existing customers and attracting prospective ones. This can be through a carefully thought out social media strategy, ensuring you have loyalty programs in place that reward customers and provide personalised experiences for each customer.
- Encourage community feedback: It can also be valuable to ensure that you’re encouraging customer reviews and engaging with them appropriately. Reviews are a way of creating conversation, healthy discourse with customers, and getting valuable feedback that you can address to improve the service you offer. While difficult, it’s important not to take criticism personally, and show you care with empathetic and action orientated language in response.
- Look after your customers through pricing and discounts: Just like with friends and family, people don’t like being ripped off by local businesses, or feeling like they aren’t rewarded for their loyalty. As such, it can pay significant dividends to use technologies like automated discounts to keep price-points fresh and provide further reason for customers to keep choosing you over competitors.
- Substance over superficial: Businesses that invest in quality and what’s below the surface tend to come out on top. As such, rather than investing in the most expensive fitout or piece of equipment – double down on the quality of your product or service.
- Make culture your superpower: Understanding and honing in on your cultural superpowers can make all the difference. Whether you’re a Sri Lankan restaurant, an Australian hat maker, a Japanese izakaya, or local seasonal restaurant – making your cultural difference front and centre in your offering and marketing can be the difference between a customer choosing your business or going elsewhere.
Neighbourhood shift a business opportunity
Australia’s shift towards becoming a neighbourhood nation provides an opportunity for small businesses across Australia. Businesses, regardless of where they are located – can tap into some of the fundamentals that make neighbourhood establishments so popular.
This includes how you make customers feel when they walk in, how you reflect the local community in everything that you do, and how you use small touches of personalisation – even something as simple as remembering a favourite order.
While the CBD certainly isn’t dead, it’s a thriving place for fast transactions and convenience, even centrally located establishments can tap into formulas that make customers choose local so often. After all, city centres are cultural epicentres too – so there’s a piece of the pie to be had for those who up their community focus, and make every customer feel individual and special.
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