Toorak Village Transformation
Orchard Piper has bought a 1,000sqm site on Toorak Road, Toorak, and is planning $100 million worth of apartments and commercial space – just a few metres away from Vicland’s $600 million office and retail development.
The 424-426 Toorak Road and 109 Mathoura Road site was bought by Orchard Piper for $20 million following negotiations with the Butler and Mendleson families to amalgamate and acquire 6 individual properties.
It will build a 7-storey building with apartments fronting Mathoura Road, and retail and commercial spaces fronting Toorak Road. The retail and commercial component of the building will be retained, with the top commercial floors to become its headquarters, while local pharmacist C. Wallis & Son, which has occupied the corner shop since 1981, has signed a pre-lease agreement to remain at the same location within the new development.
Construction is expected to begin in the 2nd half of 2022.
On the opposite site of the strip, Bill McNee’s Vicland has approval for a stepped 8-level building with more than 10,000sqm of office space and 3,500sqm of retail on the Village Way shopping arcade site at 489-505 Toorak Road, which it bought 2 years ago for $80 million.
Vicland this week sold its newly-built 9-level office building at 11 Wilson Street in South Yarra for $75 million, to German fund manager Real I.S. Group on a yield of circa 4.5%.
The 6,300sqm glass-encased building is fully-leased to tenants including co-working space provider The Commons, marketing company Revolution 360, research firm Ipsos and Impressive Digital, while Vicland’s offices are on the top floor.
Real I.S. manages $1.25 billion of assets in Australia and $8.8 billion globally.
Goldfields is currently developing a new 24-level office building at 627 Chapel Street, while close by in the South Yarra section of Toorak Road local developer Oreana Property has recently bought South Yarra Square and a neighbouring row of 4 adjoining Tudor-style shops for more than $48 million combined.
Meanwhile, the Jam Factory is set for a $1.4 billion redevelopment that will introduce a 170-room hotel, between 550 and 650 apartments and an office component.
Retail Recovery Heads to Chapel Street
Melbourne’s famous Chapel Street, South Yarra is seeing a new cycle of retail leasing activity in response to changing dynamics in the city’s shopping strips.
Tenants have used the conditions to move within strips to secure more prime positions, or to take up larger spaces, or expand into adjoining properties. For many landlords, the drive to secure or retain a tenant has become greater than the drive to try and obtain a benchmark rental rate.
Chapel Street, South Yarra is beginning to see a new cycle of leasing and a decrease in vacancies, from 20.4% heading into COVID down to 18.7%, according to Fitzroys’ new Walk the Strip report.
Fitzroys’ Lewis Waddell has secured a string of new deals to specialty retailers looking to take advantage of the strip’s recalibration of rents. Joe Bananas, which has boutiques in Sydney and New York, has chosen Chapel Street as the location for its Melbourne debut and taken space up at 583 Chapel Street.
Multiple tenants have made a shift from nearby to Chapel Street or within the strip in a sign that landlords are meeting the market and creating opportunities for tenants.
National menswear tenant M.J. Bale is relocating from nearby to a larger store at 558 Chapel Street with a more prominent shopfront, taking advantage of competitive rents in the process. Close by, fashion accessories retailer Trollbeads has moved from their shopping centre tenancy to 540 Chapel Street. They both follow fashion label Maatsuyker’s recent move from Greville Street to 574 Chapel Street.
On the other site of the street, Thurston and Howell are relocating within the strip closer towards the Toorak Road, to 495 Chapel Street.
Waddell said rental levels in some parts of Chapel Street, South Yarra had decreased to circa $500 to $600/sqm net, and incentives increased up to 25% in some cases, although typically they are at around 10% to 15%.
“South Yarra still has the strong fundamentals of strong, established catchment in an affluent area, an ongoing development pipeline and now, affordable rentals and strong incentive levels - this is very attractive for tenants.”
CBD Office Vacancies Up
The Property Council of Australia’s latest data showed vacancies in the Melbourne CBD increased over the 6 months to July by 2 percentage points to 10.4%.
It is the highest vacancy rate seen in the CBD since January 2000, while net absorption over the period was negative 96,635 sqm. Sublease space almost doubled to 120,000sqm.
There is 222,000sqm of new office space expected to enter the market in the 2nd half of 2021, 350,000sqm was introduced throughout 2020 before a lull over the past 6 months.
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 2021 Fitzroys.