Shopping strips find pickings a little slim
Several of the city's top destination streets are struggling as shoppers chase bargains online and big suburban malls such as Highpoint roll out upmarket refurbishments.
In Bridge Road - once renowned as a vibrant discount clothing strip - more than one in 10 stores are vacant. Traditional haunts such as Toorak and Burke roads are also hurting.
Between them, the number of empty shops and vacancies has risen to 11.61 per cent, 9.56 per cent and 5.08 per cent respectively.
Others, such as Chapel, Acland and Church streets, are faring better.
Nevertheless, tough retail trading conditions have lifted the average vacancy rate for the city's 11 premium strips to its highest level in 13 years.
In January this year, vacancies rose to 5.35 per cent. In 2000, they were 3.3 per cent, figures from CBRE and Knight Frank show.
In that time, competition from online, bulky goods, direct factory outlets, refurbished suburban malls and even heavyweight CBD retailers has intensified.
Shopping strips with a supermarket, bank, and retailers that weren't reliant solely on discretionary spending, were more resilient, Fitzroys director David Bourke said.
The dominant retail categories on most streets are food outlets or clothing and footwear.
Clothing is the most vulnerable category to changing shopping habits.
"Consumers still want to spend time in retail strips," Knight Frank research director Richard Jenkins said. "But they've got to evolve and offer a more unique presence."
CBRE's Zelman Ainsworth has noticed an improvement this year.
A property at 178 Chapel Street in Windsor was filled within a week of a "for lease" sign being erected, he said. Another in Victoria Street, Carlton, recently attracted similar interest.
"The level of inquiry that is being received across our leasing campaigns has literally doubled since 2012," Mr Ainsworth said.
CBRE data shows rents remained relatively stable last year.
Toorak Road in South Yarra had the lowest ($400 to $700 per square metre) while Chapel Street commanded the highest ($1000 to $1400 sq m).
Investors had brought on sharp yields, which meant rents have grown steadily, Mr Jenkins said.
"That has become a factor. There will have to be an adjustment in rents to attract tenants," he said.
Properties on popular streets are prized by investors because they are geographically limited.
"The amenity they have is why they are sought after by investors even though they're offering a low return compared to other asset classes. Ultimately the strips are irreplaceable," Mr Jenkins said.
sjohanson@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Melbourne's premium shopping strips have seen vacancies rise because shoppers are moving online and big suburban malls (for example Highpoint) have upgraded, increasing competition. Other factors include bulky-goods stores, direct factory outlets and stronger CBD retailing, which together have lifted the city's average vacancy to its highest level in 13 years.
Bridge Road — once a busy discount clothing strip — has more than one in 10 stores vacant, while traditional strips such as Toorak and Burke roads are also under pressure. By contrast, streets like Chapel, Acland and Church have been faring better and attracting more tenant interest.
According to CBRE and Knight Frank data cited in the article, the average vacancy for the city's 11 premium strips rose to 5.35% in January (the highest in 13 years), up from 3.3% in 2000. Some individual strips are considerably higher, with Bridge Road reporting vacancies above 10%.
Clothing and footwear are the most vulnerable categories because they rely heavily on discretionary spending and have been most affected by the shift to online shopping. Food outlets remain dominant on many strips and tend to be more resilient.
Strips that include non-discretionary services — for example a supermarket, a bank and everyday retail — have proved more resilient. Fitzroys director David Bourke noted that locations not solely dependent on discretionary spending have held up better.
CBRE data in the article shows rents remained relatively stable last year, with wide variation (Toorak Road around $400–$700 per sq m and Chapel Street $1,000–$1,400 per sq m). However, research suggests investors pushed down yields and rents have grown steadily, so there may need to be rent adjustments to attract new tenants.
Yes — CBRE's Zelman Ainsworth reported an improvement, noting examples where properties were filled quickly (one on 178 Chapel Street was taken within a week) and saying inquiry levels for leasing campaigns had doubled since 2012.
Investors prize popular shopping strip properties because they are geographically limited and offer unique amenity. Knight Frank research director Richard Jenkins and others say strips are sought after and effectively irreplaceable, even if they currently offer lower returns compared to other asset classes.
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