Retail vacancies down 37 percent on post GFC high

Melbourne’s CBD retail core has continued its overall downward trend recording a vacancy rate of just 3.3 percent in 2016 according to research from Savills.

Research from Savills found a moderate rise of 0.7 percent on the previous year’s figure but well below the 5.2 percent, five year average.

The survey of CBD Core & Swanston Street Precinct found there were just 39 vacancies among the 1181 shops which are dominated by Clothing, Footwear & Personal Accessories stores (492) and Cafes, Restaurants & Takeaway Food Services (281).

The number of shops grew from 1132 to 1181 over the 12 months, largely due to the opening of St Collins Lane.

Notable debutants to CBD trading included Debenhams which will open its first Australian flagship store (4000 sqm) at St Collins Lane in September, joining  L'Agent, Kooples and Zadig & Voltaire.

Meanwhile Sandro and Maje, Folli Follie and REISS, Coach, TAG Heuer and Furla have also opened up to trade at the refurbished city centre.

Elsewhere US based footwear retailer, Foot Locker, leased a prime 600 square metre Bourke Street Mall premises, Michael Hill Jewellers leased 69sqm on the corner of Bourke and Swanston streets.

Viva Hair leased 142sqm at 147-149 Russell Street, Connect Hearing leased 124sqm at Centrepoint, and  Sushi Hub continued its CBD expansion with a 26 Elizabeth Street lease (all Savills leases).

The data which paints a relatively positive picture of CBD retailing reflects growing CBD and worker populations,

This has driven a significant rise in service and hospitality based retail in recent years, as well as recent ABS data indicating growth in Victorian retail trade and a household move away from saving to spending.

ABS retail trade (seasonally adjusted) data revealed Victorian retail trade grew by 4.12 per cent in 2016, above the national average growth of 3.45 per cent.

Meanwhile the household savings ratio has been in +6 percent territory over the past year - its lowest level since the GFC - indicating households budgets have begun a shift away from saving to spending.

Monica Mondkar, Savills’ associate director research and consultancy, said Melbourne’s CBD core retail had weathered an apparent downturn in retailing surprisingly well given static wages growth and moderate levels of consumer confidence.

"Melbourne’s CBD has undoubtedly been a good performer in recent times with vacancy characteristic of periods of stronger economic growth and certainty," she said.

"But what may seem outwardly as anomalous growth has some key underpinnings that more than adequately explain its status.

"There has been an apartment boom in Melbourne over several years which has significantly increased CBD and environs residential populations,

"Meanwhile latterly a stronger office leasing market has also increased white collar employment and hence worker population, and of course a resurgence in student numbers has also been important.

"When you consider that the dominant CBD retail sectors are hospitality, food, and service sector related, it’s clear that population growth factors have been the key driver of CBD retail."

Ms Mondkar said the continued influx of high profile global fashion brands and the attraction of modern retail hubs was also attractive to both tourists and Melbourne’s suburban population.

"The number of new and refurbished retail precincts and the continuation of the influx of high profile global brands has no doubt accounted for a significant part of the increase in spending, attracting thousands of new shoppers to the CBD," she said.

"With the resident population alone expected to grow by 14 per cent by 2020 we are going to see the vacancy rate remain low over the medium term."

Source: Savills Research

Ms Mondkar said the demographic change - which reflected a cultural shift with Melburnians, once wedded firmly to the suburban quarter acre block.

"It is now showing a definite penchant for inner-city apartments, fashion, education sector growth and tourism would continue to bolster the coffers of CBD retailers," she said.

"Apartment living is a development which is here to stay and that will continue to be a key driver in the make-up of CBD retail.

"At the same time Melbourne remains the fashion capital and is also firmly on the radar with tourist shoppers and students and those factors will continue to drive the CBD market for the foreseeable future.".   

The survey found little movement in rents which now range between $1500 a square metre, for CBD shopping centre space, to circa $11,000 a square metre for prime space on Bourke Street Mall.  

Source: Savills Research

Two levels, numbers seven and nine, are currently up for lease through Savills on the south eastern corner of Queen and Collins Streets in 379 Collins Street (pictured above).

A combined total area of 2954.10sqm is available at a cost of $116.00 per sqm per annum.