Weekly Wrap

Fitzroys Weekly Wrap - 16th August 2019

Posted on 16th August 2019

000 Retail 05

76 Garden Street, Geelong
Geelong investors paid $1.46 million for the vacant 428sqm site, which has a single-level 250sqm building and on-site parking.

Shop 2, 190 Bay Street, Port Melbourne
The 182sqm vacant ground floor strata shop sold for $1.88 million.

Shop 45, Royal Arcade, 335 Bourke Street, Melbourne
Women’s fashion label Tanzie Adler inked a 3+3-year lease for the 15sqm space at $51,500pa gross.

329-331 Clarendon Street, South Melbourne
An Indonesian restaurant operator signed a 5+5-year lease for the 200sqm fitted space at $80,000pa.

178 Chapel Street, Windsor
Oasis Bakery leased the 73sqm shop for 5 years at $62,000pa gross.

000 Offices 05

Level 3, 2-4 Ross Place, South Melbourne
Private investors traded the whole strata floor of 360sqm for $2.65 million, at a 6.1% yield.

Level 1, 313 Flinders Lane, Melbourne
The vacant 180sqm strata whole floor sold for $1.41 million.

329 Queensberry Street, North Melbourne
The vacant 2-level brick office building of 240sqm, on a 118sqm site, sold for $1.4 million.

2 Luton Lane, Hawthorn
Swinburne University signed a 5-year deal over the whole 5,660sqm building, which includes 182 parking spaces, at $510/sqm.

000Industrial 05

25 Darby Way, Dandenong South
The 1,950sqm building, on a 3,141sqm site, sold for $3.66 million with a lease to Trellborg Wheels returning $181,066pa net.

10 Ponting Street, Williamstown
An owner occupier paid $3.375 million for the 4,427sqm block, which is zoned Industrial 1 and has a 2,109sqm vacant office, showroom and warehouse building.

54-58 Lipton Drive, Thomastown
Victoria Farm House Food Service sold its food warehouse and cold storage facility to another owner occupier for $2.25 million.

1 Hall Street, Hawthorn East
German shop fixtures and shelving manufacturing giant Wanzl is moving its Australian headquarters to the 540sqm office and warehouse facility, signing a 5-year lease at $128,750pa plus outgoings and GST with 3% annual increases. The building is part of a larger site that Cadence Property Group recently acquired for $6 million.

16 Naxos Way, Keysborough
Rubber manufacturer Envirorubber leased the 533sqm office and warehouse for 5 years at $73,000pa net.

000 Specialised 05

Units 1-3, 212-220 Clayton Road, Clayton
The 529sqm strata medical asset in the Monash Specialist Medical Centre sold for $4.465 million, at a 5.71% yield and is occupied by MIA Radiology.

000 Talking Points 05

Service Retail Emerges As Major Player In Melbourne’s Shopping Strips

Service retail has emerged as the newest bellwether sector of Melbourne’s iconic shopping strips, which continue to adapt to the changing retail environment and the city’s nation-leading population growth.

Volume 3 of Fitzroys’ Walk the Strip shows a broad lift in the proportion of service retailers over 2018/19, increasing in 26 out of the 33 surveyed shopping strips surveyed across Melbourne.

This compares to around 15 of strips showing increases in the proportion of specialty retail, while 8 strips saw an increase in food and beverage representation.

An average of 30% of businesses in the shopping strips are made up of service retailers. Specialty remains the largest component at about 34%, while food and beverage accounts for circa 29%, and vacant shops 7%.

Service retail has become a bellwether for vacancy rates. More than 85% of strips that saw an increase in service retail over 2018/19 also witnessed a tightening in vacancy.

Meanwhile, 89% of strips in which food and beverage decreased also saw a rise in vacancies.

Fitzroys Director – Agency, David Bourke said Melbourne’s population growth and increasing preference for medium and high-density residential living had prompted a well-documented food and beverage boom throughout retail strips in recent years.

“The latest stage of this evolution is the emergence of service retail as an important driver of tenant demand,” he said.

“Much of the growing population is centred around the shopping and lifestyle strips, and people appreciate the convenience of medical, health and skin care clinics, dentists, optometrists, masseurs, and fitness studios and gyms located nearby.

Bourke said service retailers have started to move from the periphery of the strips to prime locations, which they previously wouldn’t have considered.

“For all the consumer behavioural and shopping changes brought about by e-commerce and logistics advancements, it remains difficult for the online world to replicate a quality service retail and hospitality offer.

“Retail isn’t simply just fashion and footwear. Retail also includes service providers and food and beverage operators, and it is fascinating to see the myriad ways in which individual strips across Melbourne navigate and adapt to these changes.”

Fitzroys Director – Leasing, Rick Berry, said retail strips are an honest reflection of the retail landscape.

“Melbourne’s strips reflect where retail and its different forms are at a certain point in time. This creates an environment that encourages innovation and intuition.

“Smarter operators that can capture cultural and services demands will influence the retail landscape. Well-located properties will remain in high demand. Those fundamentals won’t change.”

He said multiple owners along shopping strips don’t have to deal with preconceived ideas of value, and so rents are able to change and markets can respond to different drivers. There has been a growing understanding and acceptance of this between landlords and tenants.

“This is reflected in the changes in tenancy types we have seen in recent years, as well as the levelling out in vacancies across Melbourne’s shopping strips.”

Trendy hospitality and lifestyle precincts in the inner north recorded some of the sharpest vacancy rates in 2018/19, and have also seen service retail make an impact. Smith Street, Collingwood has seen vacancy tighten to 2.7%, helped by service retail surging from 17% to 36% over the past 2 years; while in High Street, Northcote vacancies tightened further to 3.0% as the proportion of service retail grew by 3.7% over 2018/19.

The proportion of service retailers has increased along the length of the another edgy inner-north lifestyle icon, Sydney Road, and has become noticeably higher along Hampton Street, Hampton; Centre Road, Bentleigh; Bay Street, Port Melbourne; Douglas Parade, Williamstown, and Glenhuntly Road, Elsternwick.

Meanwhile, evergreen strips in strong catchments with a specialty and fashion-oriented offering continue to trade strongly. Vacancies in Church Street, Brighton remain low at 2.7%, while Hawksburn Village – traversing the border of Toorak, South Yarra and Prahran – was down from 10.1% to 6.2%. High Street, Armadale continues to see retail tenants clambering for absolute prime sites.

They are among the strips with the highest proportion of specialty retail. Hawksburn Village is second with 57.7%, after the highest increase over 2018/19 of more than 10%, while Church Street has 55%, and High Street is fifth with 50%.

The biggest improvements in vacancy rates were seen in Hawksburn Village (tightening by 3.9%); Douglas Parade (3.6%); Glen Huntly Road (3.5%) and Bridge Road, from Church Street to Burnley Street (2.9%)

Vacancies in Chapel Street, South Yarra – which has a high specialty retail component of 55% – were down to 15.6% from 18.1%, and all 3 major sections of Bridge Road, Richmond also tightened.

Disclosure: The weekly Fitzroys Property Wrap is for information only on transactions in the Melbourne property market. Fitzroys provides this information as a public service. We are not purporting that all sales and leases within this report were transacted by Fitzroys. Terms/Privacy © Copyright 2019 Fitzroys.