Melbourne’s CBD remains a strong performer nationally despite the rise in retail vacancy rates. It recorded the third lowest vacancy rate at 3.7 per cent behind Sydney (3.3 per cent) and Canberra (3.0 per cent), well below the national average CBD vacancy at 6.3 per cent .

A dichotomy has emerged with prime vacancy low and higher availability in secondary grade retail locations. Retailers are conscious that prime locations have higher foot traffic and offer the ability to cluster with similar categories. While current vacancy rates appear comparatively low, occupancy in the current market is heavily supported by the expansion of food-based retailers rather than fashion retailers.

Investor sentiment remains strong despite challenges in the retail landscape

Investors remain keen on Melbourne CBD retail property. Retail is a defensive sector of commercial property and strong asset management skills can mitigate some of the idiosyncratic risk factors associated with the sector. The sale of St. Collins Lane and Myer Melbourne on Bourke Street in late 2016 delivered the two of the largest CBD sale transactions over the past 10 years.

Investor demand for CBD retail assets remains firm as the catchment for CBD retail – working population, resident population and daily visitors – is projected to grow over the next decade.

Residential development activity within the CBD & fringe precincts has vastly increased the number of city residents. Over the period from 2006 and 2016, the population of the Melbourne CBD increased by 172 per cent, while CBD employment increased by 13 per cent.

Melbourne has become an attractive tourist destination with strong growth from international and interstate travellers, while the number of daily visitors from across Victoria has also increased.

Table 1: CBD population change – 2011-2016

Source: Victoria State Government, year ending June 2017

Table 2: State Tourism – year ending June 2017
Source: Victoria State Government, year ending June 2017

Higher education driving demand for local retailers

Higher education has emerged as an important export for Melbourne, allowing the city to market itself beyond the traditional leisure and business travel segments. Education-related tourism resulted in the highest levels of expenditure by international visitors in the year ending June 2017.

Chart 1: CBD Retail Vacancy of Speciality Shop (%)

Source: JLL Research

Docklands: The next wave of retail development

The spotlight will be on Docklands with the next wave of retail development. The newly renamed District Docklands is angling to capitalise off the 25,000+ jobs created over the past 10 years in the precinct; with a AUD 150 million, 9,000 sqm re-development and completion expected in 2019.

Major pre-committed tenants include H&M, Hoyts and Woolworths. In addition, the 10,000 sqm retail component at Collins Square is 90% pre-committed and will add a diverse range of retail amenity to the Docklands.

Login

Label

Name*

Email*

Website

Company

Label

Name*

Email*

Website

0 Comments

Inline Feedbacks

View all comments