Rising retail vacancies in Melbourne CBD

bourke-streetRetail vacancies in Melbourne’s CBD have increased over the past year, while shopping centres have shown an immunity to the trend with vacancies dropping to under 1.0 per cent, the first time it has fallen to this level, according to Knight Frank’s latest CBD retail survey.

The survey showed that the overall CBD retail vacancy rose from 2.45 per cent in June 2016 to 2.7 per cent by the end of May 2017.

Gary Loo, Knight Frank retail leasing director, said strong demand from tenants locating in shopping centres is largely attributed to incentives offered by landlords, which can include fit out contributions rent free periods of up to 15 per cent.

“The vacancy centre for shopping centres dropped from 2.33 per cent to just 0.95 per cent with 234 Collins and GPO recording no vacancies while the Emporium was just 0.38 per cent and Australia on Collins had the highest of the centres at 1.85 per cent,” said Jane Wong, Knight Frank research analyst.

Wong said the street fronts had a moderate rise from 3.31 per cent to 3.5 per cent with Little Lonsdale Street experiencing the highest, increasing from 20 per cent to 28.6 per cent over the year to May 2017 while Bourke Street remained stable at around 6.72 per cent with the prime section still at zero.

“Swanston Street had a slight rise from 1.37 per cent to 1.93 per cent while Elizabeth Street was steady at 1.75 per cent with tenants lured to the more affordable rentals in that precinct,” Wong said.

The survey found arcades have fallen out of favour with Melbournians with the vacancy rising from 0.74 per cent to 4.95 per cent, the highest it has been in ten years.

While a number of the arcades and laneways did record zero vacancy rates, several saw substantial rises including Centreway Arcade, Tivoli Arcade and Mid City Arcade. There are currently 17 shops available for lease (within Arcades/Laneways) compared with three at the equivalent period in 2016.

Loo said following the collapse of a number of brands, the arrival of Amazon may further impact retailers, who need to focus on service and delivery aspects, potentially reducing footprint of larger retail premises.

He said rental rates in the Melbourne CBD have remained relatively stable over the past 12 months.

Knight Frank Research found that as of June 2017, gross retail rents in the super prime retail Core precinct of Bourke Street currently range from $8,000 to $10,000 per square metre, while Prime Street Frontage retail rents range between $1,500 and $5,000 per square metre. Rents in arcades presently average $1,600 per square metre while shopping  centres attract rental rates between $800 and $2,000 per square metre.

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