Big retailers squeeze suburban shopping strips

Simon Johanson
August 20, 2014
The Age

The arrival of a host of international retailers and the opening of Melbourne’s swank new Emporium shopping centre has taken a heavy toll on traditional suburban retail strips, with vacancy rates soaring on once-bustling streets.
Richmond’s Bridge Road this month recorded its highest vacancy level in 10 years, with one in five shops empty. Vacant stores in the once-popular strip jumped from 16.5 per cent a year ago to 19.3 per cent this year, with 46 standing empty.
Chapel Street in South Yarra, Burke Road in Camberwell and High Street in Armadale were also out of favour with tenants, reaching their highest vacancy levels in five years, Knight Frank research shows.
Research director Richard Jenkins said suburban strips were struggling following the success of the CBD and Emporium in attracting leading offshore retailers and customers.
Emporium Melbourne, completed and opened in April, will have its official Baz Luhrmann-inspired launch on Wednesday.
Other new international arrivals include Swedish giant H&M and Japanese fast fashion brand Uniqlo. ”The prime CBD retail market now has a vacancy of just 3.0 per cent, while the overall suburban strip rate was 7.7 per cent,” Mr Jenkins said.
But higher vacancy levels in suburban strips were not putting off investors, with demand still surprisingly strong, Teska Carson’s Matt Feld said. Investors had a ”high regard” for well-located property on retail strips.
Mr Feld and colleague Michael Ludski recently sold 559 Chapel Street for $4 million to a private investor on a 5.12 per cent yield.
Cosmetics retailer MAC had just signed a new lease in the shop for $205,000 per annum on a six-year term.
”Whilst there are several shops in the street for lease, enquiry remains quite strong and this and other recent sales indicate there’s still a lot of confidence in retail and Chapel Street in particular,” Mr Feld said.
A recent auction of BC’s sports bar in Lygon Street attracted 100 onlookers and six bidders before the venue sold for $3.66 million, he said.
Other factors driving investor demand were the rapid growth of the self-managed super funds and owner-occupiers taking advantage of low interest rates.
Burke Road’s vacancy rose from 6 to 9.5 per cent, Chapel Street’s went from 6.1 to 8.4 per cent and High Street’s from 6.4 to 8.3 per cent, Knight Frank figures show.
Some destination strips defied the malaise, enjoying falls in vacancy levels. ”Toorak Road in South Yarra experienced the highest fall, dropping from 12.8 per cent to 7.7 per cent, driven by an influx of cafes and restaurants,” he said.
Church Street in Brighton had the lowest vacancy at 1.1 per cent, closely followed by Acland Street in St Kilda at 2.7 per cent.
Most new tenants taking space in suburban strips were restaurants or cafes.
Bridge Road had the highest, 21 per cent, churn rate of retailers, with the majority of incoming tenants still selling discount clothing.
Tenants were still struggling with high rents and soft consumer sentiment but the challenging times may be behind the sector with recent Australian Bureau of Statistics retail figures showing a 15.2 per cent growth in clothing sales and a 7.1 per cent increase in food sales.
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