Melbourne’s Bourke Street mall rents trump Sydney’s Pitt Street mall as most expensive for first time in a decade: CBRE

For the first time in more than a decade retailers are paying more on average to lease super-prime locations on Melbourne’s Bourke Street mall than on Sydney’s much-lauded Pitt Street mall, according to research by CBRE. 

The property group has calculated that the indicative rental on Pitt Street mall has fallen to $7,560 per square metre net per annum below the indicative rental of $7,700 per square metre net per annum on Melbourne’s Bourke Street mall.

According to CBRE executive director for global research and consulting Kevin Stanley, the indicative rental measures is a better indicator of what retailers are paying rather than the traditional focus on the highest rents achievable, which are generally a very small component of the market (with the title still held by Sydney). 

Based on the indicative measure, Stanley says “Melbourne was now well outclassing Sydney in both the super prime market (that being Bourke Street Mall in Melbourne and Pitt Street Mall in Sydney) and the prime market”.

Sydney lost its crown after indicative rents for super-prime space in and immediately around the Pitt Street mall dropped 6.2% in the final quarter of 2011, the first drop in 10 years. 

According to Stanley, Sydney super-prime retail market has failed to recover after slumping last year, while the market was also disrupted by development of Westfield Sydney, which increased vacancies around the mall. 

CBRE notes that while the total retail vacancy rate in both Sydney and Melbourne remains low, they have crept higher over the past few years, with Sydney’s latest count showing a total rate of 3.1%, up from 0.6% in late 2009. 

Stanley says the 3.1% rate in Sydney is, in fact, the 10-year average, but the increase from such a low point just a few years ago had clearly caused some stress on rents. 

The gap is even greater in the prime space – the areas around pedestrian malls such as Pitt Street mall and Bourke Street mall. 

In these locations, indicative rents in Melbourne are now 18% above those of Sydney at $3,056 per square metre per annum vs $2,496 per square metre per annum net. 

“Similar to the change in super-prime rents, it’s the 16% fall in Sydney’s Prime rents over the last couple of years which has helped put Melbourne ahead,” says Stanley. 

Stanley does point that if you look at highest achievable rents, Sydney continues to outstrip Melbourne. 

“The highest Super Prime rent quoted in the Sydney CBD market is $11,560 per square metre, which is still 33% above the equivalent in Melbourne,” he says.

Bourke Street mall photograph courtesy of Flickr.