Melbourne Shopping Strips’ Sensational Rebound

Posted on 01st November 2022

Vacancy rates across Melbourne’s famous shopping strips have come down to below pre- COVID levels, amid a sensational recovery led by cafés, eateries, restaurants and bars taking up space across the suburbs.

According to Fitzroys’ latest Walk The Strip report, the average vacancy rate across 36 of Melbourne’s key shopping strips came down from 10.3% in 2021 to a long-term low of 6.7% in 2022.

Vacancies had averaged 7.6% in years leading up to COVID, and had been as low as 6.8% in 2018, before peaking during COVID as the city endured multiple lockdowns.

Walk the Strip found:

  • The average proportion of food and beverage tenants along the strips has reached a

record-high of 33.4% – accounting for one-third of all tenancies for the first time. The report shows 89% of shopping strips saw an increase in the proportion of food and beverage tenants over the past year, at an average gain of 5.8%, with both of those figures historic highs. Some 86% of strips now have a food and beverage representation that is higher than the long-term average.

  • Specialty tenancies hit a long-term low, having fallen from 37.7% in 2017 to 30.9%, and 72% of strips have seen decreases in the proportion of specialty tenants since the eve of COVID.
  • The presence of service retail has dipped by nearly 3% to 26% since 2019, as hair, beauty and nail salons and gyms were shuttered during the lockdowns, but the current proportion is higher than 2017 and 2018.
  • Rent collection has returned to pre-COVID levels.
  • Vacancies from earmarked developments now make up 3.1% of shopping strips.

“Melbourne’s local shopping strips have well and truly bounced back from the biggest crisis the city has faced in decades,” said Fitzroys Division Director, James Lockwood.

“Melburnians have spent more time than ever in their local communities. Lockdowns, and then the embrace of flexible work arrangements, have seen more Melburnians spending

their money close to home and our villages have reinforced their position as the heartbeat of their local communities. Our strip centres provide an environment in which people want to shop and find community.”

Food and beverage boom has continued throughout COVID

“The food and beverage-led recovery has gained momentum throughout the pandemic,” Lockwood said.

“A spike in eateries with a focus on takeaway and delivery was the first visible leasing response to COVID in Melbourne’s shopping strips, as operators sought to move into smaller spaces with existing kitchen infrastructure. Businesses initially sought to take advantage of these opportunities to expand and establish themselves in new markets as demand surged for takeaway and delivery during lockdowns, and this has continued through the period of flexible working arrangements,” he said.

“Melburnians have been spending money at their local shopping villages, buying their coffee and their lunches from their local cafés and eateries, which then also extends through to evening offerings for dinner and dessert,” Lockwood said.

New research from Roy Morgan shows more than seven million Australians aged 14 and over (33.4%) now use meal delivery services such as Uber Eats, Menulog and Deliveroo in an average three months, up from 3.6 million (16.9%) in early 2020. As a result of the extended lockdowns, 40.2% of Melburnians use the services, well above the national average.

“Many businesses could stay open and serve takeaway options, whereas specialty and service retailers had to remain closed through lockdowns. Specialty and service retailers then had to reopen and build their business again, so many have concentrated on that rather than taking up new stores. Food and beverage operators, meanwhile, have been able to keep expanding and entering new markets,” Lockwood explained.

“A number of food and beverage operators saw their business as ‘COVID-proof’ through operating in lockdown, and as we’ve transitioned to a COVID-normal environment they’ve actually seen an increase in turnover.”

The latest Australian Bureau of Statistics data shows the four months to the end of July were the four biggest months for takeaway food turnover ever in Victoria, while the five months to the end of July have been the biggest for the cafés, restaurants and catering services sector.

“We’ve had multiple operators state they don’t require a lot of seating and are happy for a predominantly takeaway business. We’re starting to see some that will look at converting a premises into food and beverage given how reliable business has been, but on the whole food and beverage operators continue to have a preference for taking fully-fitted spaces to save costs on fit-out – the rise in construction costs are affecting everyone, and that extends to retail fit-outs.”

Retail strip properties typically attract rents from around $50,000 to $75,000 per annum, which Lockwood said is an acceptable price point for tenants who have generally become more risk-averse and premises with minimal tenancy works are being received better than those requiring a full refit.

“These spaces present fast and cost-effective COVID-proof opportunities to remain active, or to expand into new locations and markets – and not just survive, but thrive – as pick-up and delivery services are favoured. We saw that again through the past winter that was dominated by another wave of COVID, plus the usual cold and flu period.”

Centre Road, Bentleigh has emerged as one of the strongest-performing strips, largely thanks to its triple-supermarket anchoring and the effects of the state government’s level crossing removal program, and it has also been one of the main beneficiaries of the food and beverage trend. It recorded a 13.7% increase in food and beverage tenants – including popular fish and chips franchise Hunky Dory, Bentleigh Social and Artisanal Bakehouse – driving a 2.2% reduction in vacancies over the past year to 3.1%, one of the lowest in Melbourne. The City of Glen Eira has also begun implementing works for Bentleigh Eat Street, which will overhaul 2,400sqm of public space that will be activated by more cafés, restaurants, bars, and outdoor seating, and supported by the extension of trading hours.

Lygon Street, Carlton saw a 12.0% increase in hospitality tenants, which included Miss Frankie, Karen’s Diner, Mexican offering La Cabra, Indian restaurant Kahaani, Palm Arabian, café and bar Good Measure, ice creamery Beku Gelato and dessert bar Sticksies - to be joined soon by Zeus Street Greek - all adding another fresh twist to the strip following recent entrants such as contemporary Chinese restaurant Lagoon Dining. The famous dining precinct recorded an 8.5% decline in vacancies to 12.0%. The prime section of the strip continues to outperform the city end, which has a higher specialty focus. Other new tenants include fashion retailers Elk and Atime Studios, homewares retailer The Damsel Store, and pool hall Cue Stars Billiards.

One of Melbourne’s most consistent shopping strips, Glenferrie Road, Malvern, saw a 13.9% increase in food and beverage and hospitality tenants, which offset the loss of service and specialty tenants and brought vacancies down to 7.5% after they spiked in 2021 to 11.3%. Achiote Mexican Restaurant was among them, cult favourite Chargrill Charlie’s opened its second Melbourne store on the strip, New York Minute made an entrance and Stan’s Deli opened their New York-inspired deli, and Malvern Fish and Chipper also opened.

Caterers Platter & Boe, events planner The Posh Palais, and kids’ party venue Studio Royale also moved in.

Rapidly emerging Glen Huntly Road, Elsternwick saw vacancies cut to just 3.7% as Betty’s Burgers, Bissel B Bagels and Chatime all opened their doors, while new bar and restaurant Copycat opened next to the Classic Cinema.

The food and beverage-dominated section of Bridge Road, Richmond, running from Church Street to Burnley Street, was another strip to see vacancies come down thanks to the trend, with the introduction of restaurant Lene, burger specialists Burgertory, Pakistani restaurant Al Nawab, Smile Thai and Señor Mexico. In Chapel Street, Windsor, hospitality tenancy take-up slashed the vacancy rate by more than half with new entrants including global frozen yoghurt franchise Llaollao, upmarket chicken restaurant Henrietta, pan-Asian bar and restaurant Galok, California Burgers, Oakberry Açaí, with its first Melbourne location, Blackwoods Wine and Cocktail Bar, and new bar Montrose Social.

Other strips to see a notable decline in vacancies largely thanks to food and beverage tenants moving included Bay Street, Port Melbourne; Brunswick Street, Fitzroy; Fitzroy Street, St Kilda; Hampton Street, Hampton; High Street, Northcote; the southern section of Sydney Road, Brunswick; Toorak Village, and Whitehorse Road, Balwyn.

Vacancies in iconic shopping strips come down

Arguably Melbourne’s most famous shopping strip, Chapel Street, South Yarra, saw vacancies come down to a long-term low of 10.7%, on the back of a return of specialty retailers, and food and beverage take-up hitting a long-term high. Fitzroys Senior Manager – Lewis Waddell has just negotiated four leases along the strip, including to fashion retailer Casa Amuk. Other fashion entrants include Saba and Gorman, Calibre - across two different stores - Anna Thomas, shoe retailer Zomp, LTRO Studio, Leaterials and Eternal Bridal, which leased 517 Chapel Street in a notable move from High Street, Armadale. They followed the openings of Joe Bananas and M.J. Bale.

Waddell said a lead-in of six to 12 months before COVID of informing property owners about cyclical changes in the market laid the groundwork for changing expectations, and this has flowed through to leasing activity.

“We’re seeing deals transact in Chapel Street, South Yarra. Tenants are finding the demographic opportunities on Chapel Street so appealing they have been optimising their position as well as actually moving from another retail strip into Chapel Street,” he said.

Waddell has also leased 538 Chapel Street to art gallery Lionia Art, which will be moving from Black Rock, and the former Flight Centre site at 433 Chapel Street to dental group D- Vine Smiles. New food and beverage entrants include four-level Italian bar and restaurant Stella, Night Owl Bar, Black Magic Bar, café Boy and Dukang Restaurant & Bar.

Church Street, Brighton yet again recorded the lowest vacancy rate in Melbourne, steady at just 0.7%. Its tenancy mix changed slightly, with the introduction of food and beverage tenants such as Blakes Feast. High Street, Armadale’s vacancy improved from 9.1% to 5.1% thanks to specialty retail take-up, and Puckle Street – at the centre of the generational development boom in Moonee Ponds – tightened to 3.2%.

Other top performers by vacancy rate were High Street, Kew (2.2%), Ferguson Street, Williamstown (2.7%), Malvern Road, Toorak, better known as Hawksburn Village (3.0%), and Swan Street, Richmond (3.5%).

Bridge Road, Richmond continued its high-profile transition from a hub for fashion factory outlets, and has become three distinct strips – each of which saw vacancies come down in the past year. The prime Church Street to Burnley Street section saw vacancies come down to 6.9%. The section closest to Punt Road, running to Lennox Street which is primarily service oriented, also saw vacancies come down, to 15.4%, albeit remaining at a Melbourne- high for a second year running.