Melbourne’s record retail vacancy rate

Melbourne skyline retail

Leading fashionistas are abandoning Melbourne’s once-coveted retail strips with almost one in six shops now vacant in both Chapel Street, South Yarra and Bridge Road, Richmond, according to real estate firm, Knight Frank.

Richard Jenkins, Knight Frank research director, said Chapel Street’s vacancy climbed from 11.0 per cent in August 2015 to a current rate of 13.5 per cent.

Jenkins said after experiencing extreme vacancies of over 20 per cent, Bridge Road looked like it was recovering but the vacancy rate rose from 13.0 per cent to reach almost 17 per cent in September this year.

According to him, both Chapel Street and Bridge Road were undergoing a major identity crisis with vacancies climbing since leading clothing retailers abandoned the strips.

The study shows some of the monitored retail strips have been impacted from the evolution of discount shopping stand-alone centres which have seen a number of tenants clustering together.

In addition, many of the fashion focused strips have been impacted by the growth of online retailing with estimates that Australian consumers have spent around $20.6 billion online over the last 12 months.

Whereas, Knight Frank research reveals that Melbourne’s CBD retail market has recorded its lowest vacancy rate in five years, falling to 2.4 per cent. Melbourne CBD-based employment and residential population growth continues to underpin demand for CBD retail space from both domestic and international retailers.

“Six years ago, clothing and footwear dominated both strips with 68 per cent of all shops in Bridge Road dominated by this sector while just over half of all shops in Chapel Street were clothing retailers,” Jenkins said.

Jenkins said Chapel Street currently has the most clothing and footwear retailers but the figure has dropped to 37 per cent while Bridge Road clothing retailers account for 33 per cent.

“Chapel Street and Bridge Road also experienced the highest churn factor at 16 per cent and 18 per cent respectively,” he said.

Major clothing tenants to recently leave Chapel Street include David Lawrence, Karen Millen, Forever New and Metalicus while Bridge Road lost Bossini, Ed Harry, Bird of Prey and Godwin Charli.

According to Jenkins, the strips that had attracted personal services based tenants were the top performers in the survey.

“Toorak Road, South Yarra, once the poor cousin of the retail strip analysis, now has one of the lowest vacancy rate at just 2.7 per cent with personal retailing occupying 37 per cent of all the shops. Two years ago the strip recorded a vacancy rate of 8.0 per cent.

Jenskins stated only three of the retail strips monitored by Knight Frank witnessed falls in vacancy over the past 12 months with Toorak Road, South Yarra experiencing the largest decline in vacancy down from 7.6 per cent, a year earlier.

“Likewise, Burke Road, Camberwell saw its vacancy drop from 9.5 per cent a year ago to 6.8 per cent in September 2016 while High Street, Armadale vacancies also declined falling from 7.9 per cent to 6.4 per cent over the past year,” he said.

Jenkins said all the other key strips recorded hikes with Glenferrie Road, Hawthorn rising from 4.1 per cent to almost 11 per cent; Acland Street, St Kilda increased from 2.7 per cent to 7.5 per cent; Church Street, Brighton from 0.6 per cent to 4 per cent while Puckle Street, Moonee Ponds rose from 7 per cent to 10.8 per cent.

“Overall, the total vacancy has increased from 7.2 per cent in August of 2015 to record a rate of 8.4 per cent in September, 2016, the highest in 15 years,” he said.

According to Knight Frank research, rents in Chapel Street, South Yarra still achieves the highest achieving rental levels between $800 and $1,500 per square metre per annum, however the above average levels of vacancy has placed downward pressure on rents across all the monitored strips.

Jenkins said the outlook for many of these prime retail strips, however, is positive, with many witnessing new apartment developments coming on stream, boosting the surrounding local population and will add more pedestrian traffic to the precincts.

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