This article is from the Australian Property Journal archive
MELBOURNE’S retail shopping strips are always cyclical and the current downturn is isolated to a few centres, according to Fitzroys.
Director David Bourke said the current downturn is not as severe as previous experiences.
“And as we’ve typically seen, the more significant vacancy and rental growth issues relate to a handful of centres rather than the whole sector,” he noted.
Bourke said it is easy to misinterpret a snapshot of statistics and latch onto selected vacancy rates or other metrics.
“From our experience of more than 40 years of leasing and selling in Melbourne’s strip shopping centres, this is often the time when there are good buying opportunities and the chance to buy in anticipation of stronger tenancy take-up and future rental growth,” Bourke said.
Leasing director Rick Berry said current vacancy rates in Chapel St and Bridge Rd are continually in the press, but there is little mention of the strength in strips such as Swan St, Richmond, Smith St, Collingwood, Church St, Brighton or Sydney Rd, Brunswick.
Berry said that underpinning the start of a turnaround of many of strip centres is a growing population within their catchment as new residential and commercial projects are completed.
“Whilst online shopping and the mega international retailers are impacting on the fashion sector, particularly the smaller independents, at the same time we are seeing strong and sustained demand for quality, well-positioned shops.
“A large proportion of Melbourne’s rapid population growth is being accommodated in the inner and middle suburbs and this is generating sustained local demand – particularly in the hospitality and retail services sectors,” he added.
Fitzroys agent Jordan Ceppi, who has negotiated a string of recent deals along Chapel St, said tenants are seeing the future upside in the strip as the local residential population continues to boom, driven by the nearby Forrest Hill precinct near South Yarra station.
Forrest Hill is currently home to nearly 4,000 residents and has seen $2 billion worth of construction take place in the past decade. It is still growing with new projects underway including the 50-storey Capital Grand development on the corner of Chapel St and Toorak Rd, which will bringing 396 apartments to the area, and 661 Chapel St continue to add to the busy Forrest Hill skyline, and has also led to a sharp drop in retail vacancies on Toorak Rd, just around the corner.
Ceppi said there are 140 shops trading in Chapel St between Toorak Rd and Malvern Rd block alone representing a cross section of Australia’s best retailers.
Whilst demand from fashion retailers has pulled back, new leases in Chapel St have included Byron Bay’s Stwear label Thrills at 290 Chapel St, at $50,000 per annum on a 5+5 year lease, as well as St Machine, CASA/AMUK and Mr Simple.
Other new leases include Italian restaurant Abacus, paying $300,000 per annum for the 326sqm corner with Elizabeth St near the market, and close by Boutique Deli has taken 50sqm at 589 Chapel St for $1,200 per sqm.
Ceppi said that reflecting the nuanced nature of Melbourne’s strip centres, there is virtually nil vacancy in the Chapel St block between High St and Dandenong Rd at the south end in Windsor.
The Camberwell Junction precinct, particularly along Burke Rd, has also been the beneficiary of increased residential development on its doorstep, according to Fitzroys’ Chris James.
He said strong enquiry from prospective tenants in the key inner-east strip had come as a number of developments, such as Aerial Solstice, Elmington, Middle Burke and others had brought hundreds new apartments into the area, with an estimated 1,500 new apartments about to come online or in the pipeline around Burke Rd and Camberwell Junction.
James has recently leased 670 Burke Rd to menswear label Blazer, and another clothing label in Silver Maple Boutique has taken the nearby 682 Burke Rd premises on a 5x5x5- year deal at $70,000 per annum net.
He has also leased 558 Burke Rd to homeware and giftware store at $1,300 per sqm, and with colleague Martin Huang leased 704 Burke Rd to a nail bar at $67,000 per annum net on a 4×4-year lease.
Australian Property Journal
