This article is from the Australian Property Journal archive
SOME sectors of the Melbourne CBD retail market have witnessed strong rental growth during the third quarter, according to CB Richard Ellis.
CBRE’s Q3 Retail Rents and Yields Survey highlights that Super Prime rents in Bourke Street Mall increased by 1.7% to an indicative $6,100 per sqm, whilst Prime rents recorded even stronger growth of 3.7% to $2,775 per sqm.
The real standout was the city’s Secondary market, which recorded a massive quarterly rise of 11.3% to an indicative $1,530 per sqm.
CBRE research analyst Erin Obliubek said the stand out was the stretch of Elizabeth Street between Bourke and Lonsdale Streets, where rents had jumped to range between $1,750 per sqm and $2,250 per sqm.
“Once perceived as a secondary location, Elizabeth Street is fast becoming Melbourne’s new hot spot and is beginning to achieve prime rents given the strip’s proximity to the city’s revitalized Bourke Street Mall,” she added.
Obliubek attributed the growth to limited new supply and improved retail trade figures.
“A lack of new supply and the recent capital injection by David Jones and Myer into their flagship stores is having a flow on effect to Elizabeth Street and underpinning tenant demand,” she continued.
CBRE senior negotiator Max Cookes, who recently marketed two retail shops on Elizabeth Street, said there was fierce competition for available tenancies.
“The number of enquires we received was unmatched by any other recent CBD campaign. Retailers are focusing on the dense pedestrian traffic flow along Elizabeth Street, and want to capitalise on the growth in the area, which is showing similarities to busy Swanston Street. The rents being achieved today in Elizabeth Street are at least 25% higher than what we were seeing mid last year,” he said.
The CBRE survey also highlights increased demand for food and beverage tenancies. This category makes up 25% of street frontage retailers in the Melbourne CBD, second only to clothing, footwear and soft goods.
“Unlike other retail sectors, sales growth is increasing in this market segment. Local and national food retailers are taking advantage of this and pricing fashion retailers out of the market place. In Carlow House, at 289 Flinders Lane, three of the four retail tenancies were leased to Food and Beverage operators, whilst the remaining deal was reached with a fashion label,” Cookes said.
The strength in the leasing market is also translating to strong demand for retail investments. CBRE City sales manager Sebastian Drapac said much of the demand was being driven by Asian investors, as evidenced by the recent sales of 389 Swanston Street and the Bradman’s Building.
“The strength of the leasing market coupled with the supply/demand imbalance in the prime retail sector is driving prices, as evidenced by a string of recent sales at sub 5% yields,” Drapac said.
Recent sales include 203 Elizabeth Street which sold for $7,010,000 (a yield of 3.3%); the Bradman’s Building at 270 Bourke Street for $15,000,000 (4.78%) and 389 Swanston Street which also sold for $15,000,0000 (a yield of 3.96%).
Australian Property Journal
