2019 Review / 2020 Outlook – Hospitality

Posted on 29th January 2020

352 Chapel St Internet Taco Bell

Melbourne’s world-renowned hospitality and lifestyle culture remains as vibrant as ever. Fitzroys Associate Director James Lockwood rounds up some of the big food and beverage leases the office put in place throughout 2019, as well as key trends taking place in the sector.

Operators look for versatility

Max Tsang of St Kilda mainstay Mahjong leased a small space within South Melbourne’s Clarendon Centre for his new venture Miss China, reflecting the growing trend of operators looking for more agile offerings.

Lockwood negotiated the six-year lease for the corner space at $1,666 per sqm. The Hong Kong-style soup bomb concept sees diners choose their own meat, dumpling and vegetables to go with ramen noodles.

Mahjong has been operating for over 12 years. Lockwood said more operators are opting for smaller spaces that can offer quick meals or are more conducive the growing use of delivery services such as UberEats and Deliveroo.

These can also include dark kitchens, in which multiple restaurateurs will take up a warehouse and offer select parts of their full menu for delivery.

“People want to be served quickly, whether it’s full meals or orders of a drink and a side, and smaller spaces and dark kitchens allow operators to maintain a presence in the market without necessarily having to commit to extensive fit-outs or pay higher rents.”

Lockwood said the dark kitchens are usually centred around inner city office locations, such as South Yarra and Collingwood.

According to Walk the Strip, the food and beverage proportion of Clarendon Street’s tenancy mix increased by 3.8% over 2018/19 - among the highest increases in Melbourne - to a total of 38.6%. Vacancies came down by 2.1% to 4.5%, making it one of Melbourne’s best-performing shopping strips.

Malvern home to Melbourne’s newest neighbourhood wine bar

Neighbourhood wine bars are a growing feature of Melbourne’s inner suburbs. One of the newest entrants is Essie Wine Bar, which has opened at the two-level Victorian heritage building opposite Malvern station at 35 Station Street.

Essie Wine Bar is the creation of Tasmanian-born Angus Brettingham-Moore, who has been involved with the team behind renowned local staples Toorak Cellars in Armadale and Milton Wine Shop on Malvern Road, as well as The Alps in Prahran and The Hills in Surrey Hills.

Fitzroys Associate Director, Chris James, said there is a growing foodie and wine culture appreciation spreading out from the city through to the inner south-east, creating demand for new nightlife offerings.

“The affluent area has a catchment ready-made for this type of venue, which offers extensive, high-end wine lists, while bars also attract a strong clientele of those aged in their 20s and young professionals.”

263 Lygon St 1 Lagoon Dining
Iconic Melbourne dining strip takes next step in revitalisation

The revitalisation of Lygon Street took another step with young talent emerging from popular restaurant and bar Longsong opening a new modern Asian cuisine venture in the prime of the iconic hospitality and lifestyle strip.

Lagoon Dining has just opened in the former Lygon Street Foodstore space at 263 Lygon Street.

The partners of the new venture are key talent involved with CBD venue Longsong. They include Chris Lerch, venue manager of Longsong and former manager of Flinders Street fine dining spot Ezard, and Longsong head chef Ned Trumble.

James said a new generation of bar and restaurant ventures have added a fresh twist to Lygon Street and Carlton’s hospitality scene, further enhancing the mix of the iconic Italian influence synonymous with Lygon Street and Carlton with recent entrants to the strip.

Among those are Heart Attack and Vine, Israeli-influenced vegetarian pub Green Man’s Arms, the recently re-opened King & Godfree building, wine bar Lord Lygon and Hakata Gensuke, while in the immediate surrounds are The Carlton Wine Room and DOC Pizza & Mozzarella Bar.

Cult Hungarian patisserie lands in Hawthorn

Hungarian patisserie Kurtosh is the latest Sydney eatery to expand into Melbourne, attracted to the city’s vibrant hospitality culture and nation-topping retail spending

The straight 10-year lease signed by Kurtosh on the vibrant Glenferrie Road, Hawthorn shopping strip highlights the faith retailers have in the area, and trading prospects in the city.

Melbourne and Victoria are now in number one position as the highest retail spenders in Australia, replacing Sydney and New South Wales, according to CommSec’s latest State of the States report.

Fitzroys recently leased a space in nearby inner-eastern suburb Camberwell to iconic chicken and burger business Chargrill Charlie’s, which opened recently for its Melbourne debut, as did late-night pork eatery Mr Crackles on Bourke Street in the CBD. Mary’s Burgers has just announced it will open its first Melbourne location early in November.

Chapel Street transformation rings out

Taco Bell has chosen Chapel Street, South Yarra for its Melbourne debut, celebrating its opening in December with the world’s first “tram thru”.

Lockwood, who leased 352 Chapel Street to the US-based Mexican food giant with Fitzroys colleague Lewis Waddell, said Taco Bell was looking to capitalise on the recent influx of spending within the area, and recognised the growth prospects that the growing residential and worker population offered Chapel Street.

“Residential and commercial development in the area has both increased and prompted a shift in the immediate catchment’s demographics, which has brought a higher spend on food and beverage.”

Melburnians continue to embrace inner-city living and are increasingly looking to live, work and go out in and around the city, reflected in the development of the high-density Forest Hill precinct nearby and major projects in the pipeline for the area that include the $1.25 billion Jam Factory overhaul that are transforming Chapel Street.

“Taco Bell is well-placed to offer its world-famous Mexican-inspire cuisine throughout the day to the growing worker population, in the evening to local residents, and the nightlife crowd the descends on the length of Chapel Street, which remains the busiest clubs, bar and dining precinct of any of Melbourne’s retail strips south of the Yarra, and draws visitors from across Melbourne,” Lockwood said.

Carlton attracting a new generation of breweries

The thriving hospitality and lifestyle culture across Melbourne’s inner-city is generating an increased level of interest from microbreweries and craft beer labels.

Lockwood said former warehouse buildings are being converted into brewpubs and new venues by craft labels. Fitzroys leased an 800sqm warehouse on Carlton’s Elgin Street to the historic Tooborac Hotel and Brewery, which offers its award-winning beers and pies from what was previously the home of a scrap metals dealer.

Tooborac also has plans for a regional food and crafts marketplace and a tavern operating from the site.

Bodriggy Brewing Co. has just opened its brewpub from a former LP gas conversion centre on Johnston Street in Abbotsford, while Jetty Road Brewery, based in Dromana on the Mornington Peninsula, has plans to open in a former mechanics workshop in South Melbourne.

“The rapid growth in the independent beer industry as well as inner-city living means we wouldn’t have seen this type of enquiry two or three years ago, but it’s something that will likely become more commonplace,” Lockwood said.

Microbreweries and brewpubs and independent labels are catering to a growing generation of people who have a greater appreciation for locally made and fresher produce.

“Labels and brewers find they can offer a fuller experience, including newer or limited releases and products, and in an environment they can pair with tailored food and ambience,” Lockwood said.

Retail rent records smashed amid CBD retail regeneration

Asia-based food and beverage operators demonstrate huge demand for retail space in the north of Melbourne’s CBD, capitalising on student accommodation and residential development boom and driving a generational change that is reshaping the retail landscape.

Fitzroys Alex Shum leased the 50sqm former Student Flights space at 339 Swanston Street to a bubble tea operator at a record rate for the precinct of $6,000 per sqm.

That followed the off-market lease of 299 Elizabeth Street to international bubble tea brand Prime’s Hai, at $3,150 per sqm, as well as the 200sqm double-fronted building at 423-425 Elizabeth Street to dessert house chain Hui Lau Sahan from Hong Kong, at a precinct record of $400,000 per annum net.

“This demand, driven by Asia-based hospitality businesses, continues to push rental rates into uncharted territory, Shum said.

Shum said the CBD’s north has become increasingly sought after and targeted by Asia-based franchises who are well-known overseas, as they are familiar to and popular with the large numbers of students living in the surrounding high-rise developments, close to the universities precinct.

He said the Chinatown precinct has traditionally been designated as the hotspot for Chinese and other Asia-based operators, but the growth in student accommodation and high-rise development has in a sense created a new Chinatown in Melbourne’s CBD.

Fitzroys also sold the 125sqm space at 526 Swanston Street to a Singaporean-based investor with a portfolio of successful restaurants in their home country for their first Australian venture.