Melbourne CBD vacancies hit seven-year high
An influx of international retailers over the past 12 has been unable to curb the rising retail vacancy in Melbourne's CBD, with vacancies touching a seven year high last month.
Knight Frank’s latest CBD retail survey found that the vacancy rate reached 3.9% in February - the highest since 2007. That compares to the long-term average of 2.9% and is up on last year's 2.6%.
Shopping centre vacancies recorded the biggest jump up from 1% to 4.1%, while street front shops rose from 3.9% to 4.4%.
The bright spot in the results was prime retail vacancy levels in Bourke and Collins Streets, which narrowed from 5.4% to 4%.
Despite the weaker numbers, Knight Frank retail leasing director, Gary Loo, suggests that the rise in international retailers seeking to enter the market should help bolster the take-up rate, as well as attracting other retail users.
“Well-known international brands such as Zara from Spain and Thomas Pink and Forever New from the UK have taken the lead in their entry in to the CBD while Uniqlo from Japan and H&M are anticipating their flagship stores to start-up during the first half of 2014," he said. "Further, international fashion label Topshop UK is expected to make their first CBD entry while Max Mara will also expand its footprint in the Melbourne’s CBD sometime in 2014."
He also points to other big name international retailers such as Marks & Spencer, Apple and Forever 21 as currently scouting prime CBD sites for store locations.
Going forward, strong competition from international retailers eyeing a slice of the Australian retail market was expected to cast a windfall on the occupancy levels, he said.
Knight Frank research analyst, Monica Mondkar, added that many of Melbourne’s CBD arcades recorded a near to zero vacancy, thus retaining their popularity amongst boutique fashion retailers and food & beverage outlets boosted by the large number of visitors and residents year after year.
But she noted that the combined vacancy rate of laneways and arcades modestly climbed to 2.3% in February, slightly up on the long-term average of 2.2% and from 2% in June 2013.
Equally significant in the findings was the overall churn factor, which almost doubled since June last year to 11.9%. Restaurants and cafes, fashion clothing and other goods retailing were the top churning categories.
Shopping centres had the highest churn factor of 17.1%, the report said, as more landlords took the opportunity of soft retail conditions to refurbish in order to compete with limited retail trade growth over the past two years.
One trend to emerge from the challenging and competitive environment, said Ms Mondkar was the "repositioning of centres by aggregating previous vacancies into large discount department stores in order to uplift their occupancy levels".
Examples include Japan’s discount department store Daiso, which has recently taken up over 1,000 square metres of retail space at QV, as well as the leasing of GPO to H&M, as a single occupant.
Figures from the research showed that prime CBD retail rents currently range between $2,500 and $6,000 a square metre, while secondary rents range from $800 to $1,800 per square metre.
