Only 9 percent of Aussies feel more connected to CBDs. Square’s Colin Birney shares six strategies to help businesses win in the neighborhood economy.
What’s happening: Australia is becoming a neighbour, with only 9 per cent of Australians feeling more connected to the CBD than five years ago, while 54 per cent feel more connected to neighbourhoods.
Why this matters: The preference for neighborhood businesses extends beyond dining to shopping, entertainment and social activities. Neighborhood locations are described as more homely (76 percent) and community-oriented (70 percent), with significantly friendlier staff and more personalized service.
Australia is becoming a neighborhood country, with consumers often preferring local neighborhoods for everything from dining and shopping to spending time with friends and family.
According to a recent survey by Square, only 9 percent of Aussies feel more connected to the CBD (Central Business District) than five years ago, while more than half (54 percent) feel more connected to neighborhoods. City centers appear to be losing their luster, 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 neighborhood favorites: data from millions of transactions shows that in Sydney, 4.5 percent of neighborhood customers made three or more repeat purchases in the first half of 2025, compared to 4 percent in the CBD. In Melbourne, the difference was 4.6 percent for non-CBDs, compared to 3.8 percent for CBD. While these differences may seem small, they are a clear signal of a growing trend: loyalty is shifting from city centers to local businesses.
For restaurants and small businesses, this changing behavior has a direct impact on revenue opportunities. For example, consumers now spend 73 percent of their monthly dining budget on local venues, compared to just 27 percent in the CBD.
The preference for local life extends far beyond just dining. The vast majority of consumers visit their neighborhood for daily activities: spending time with friends and family (87 percent), shopping with friends or a partner (66 percent) and going to the movies (64 percent).
The neighborhood’s secret sauce
Neighborhood businesses seem to have a secret sauce over their CBD counterparts that goes beyond 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 shows that neighborhood places are described as more homely (76 percent) and more community-oriented (70 percent).
Consumers also rated neighborhood restaurants significantly higher on most key customer experience indicators, including friendlier staff (61% vs. 12%), more likely to know the customer’s name (57% vs. 8%) and order (54% vs. 11%), and a welcoming atmosphere (67% vs. 13%).
While it’s true that the data suggests neighborhood restaurants and businesses have an edge over the CBD when it comes to community-oriented customer service, it’s a little more nuanced than that. Square transaction data suggests that suburbs are more leisure-oriented and cities are more transactional, with suburban food and drink sales peaking on weekends, while CBD locations peak at lunchtime on weekdays. As such, not all CBD customers are looking for the same experience when dining in the city, and restaurants based on quick service and convenience, such as QSRs, are more likely to thrive in CBD environments.
Community is currency
For neighborhood restaurants and small businesses, community is currency. For example, when Aussies eat at a full-service sit-down restaurant, they appreciate the local, community feel; a focus on food and culture, not aesthetics; and the use of local, seasonal ingredients. Locations with these characteristics were only beaten by local neighborhood restaurants that are convenient and close to home, which ranked number one. Here are some ways companies can put community first:
- Be the heartbeat of your community: Companies that put community and culture at the heart of their offering are likely to attract and retain large audiences. Whether that’s through facilitating community events, being active and present at local markets, collaborating with other local small businesses, or supporting local producers and suppliers – making your community the beating heart of your brand can deliver significant benefits.
- Double down on marketing: Driving community focus can also come about by doubling down on marketing efforts, using payment data to identify evolving trends and customer preferences, and ensuring you’re engaging existing customers and attracting potential customers. This can be done through a carefully thought-out social media strategy, which ensures you have loyalty programs in place that reward customers and provide personalized experiences for each customer.
- Encourage community feedback: It can also be valuable to make sure you encourage customer reviews and engage with them appropriately. Reviews are a way to create conversation, have a healthy conversation with customers, and get valuable feedback that you can use to improve the service you provide. Although it’s difficult, it’s important not to take criticism personally and show you care in response with empathetic and action-oriented language.
- Take care of your customers through prices and discounts: Just like with friends and family, people don’t like being ripped off by local businesses or feeling like they’re not being rewarded for their loyalty. As such, there can be significant benefits to using technologies like automated discounts to keep prices current and give customers even more reason to continue choosing you over competitors.
- Content above superficial: Companies that invest in quality and what lies beneath the surface often come out on top. Therefore, double the quality of your product or service, instead of investing in the most expensive furnishings or equipment.
- Make culture your superpower: Understanding and honing your cultural superpowers can make all the difference. Whether you are a Sri Lankan restaurant, an Australian hatter, a Japanese izakaya or a local seasonal restaurant, putting your cultural difference at the heart of your offering and marketing can mean the difference between a customer choosing your business or going elsewhere.
Neighborhood shifts offer business opportunities
Australia’s shift to a Neighborhood Nation presents opportunities for small businesses across Australia. Businesses, regardless of where they are located, can benefit from some of the fundamentals that make neighborhood branches so popular.
This includes how to make customers feel like they’re coming in, how to reflect the local community in everything you do, and how to apply small touches of personalization – even something as simple as remembering a favorite order.
While CBD is certainly not dead, it is a booming place for quick transactions and convenience. Even centrally located branches can use formulas that mean customers often choose local. After all, city centers are also cultural epicenters – so there is a piece of the pie to be won for those who focus more on the community and make every customer feel individual and special.
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