Food stores replacing fashion retailers as CBD tenants in Melbourne: HTW

The challenge posed by online retailing may start to impact on the tenancy mix in the Melbourne CBD, according to property valuation firm Herron Todd White.

In its October commercial property update, HTW notes a “more recent trend has emerged whereby clothing and fashion retailers are being replaced by food stores”.

It cites as on example Malaysian restaurant chain Petaling Street replacing Jays Jays clothing store as the tenant at 162 Swanston Street. Recent Swanston Street leases have been negotiated at around $1,600 per square metre.

The 110-square-metre shop next door at 160 Swanston Street, which formerly housed street wear retailer Crossover, is now vacant and also being marketed with food tenants in mind, including "the opportunity for kerb-side seating subject to planning approval". It is being marketed by Ben Stanley and Tom Ryan of Allard Shelton.

Another example is the Icey Dessert Café, which replaced Shibuya Fashion as the tenant at 231 Elizabeth Street, a 104-square-metre shop. Shops nearby on Elizabeth Street have leased for around $2,800 per square metre recently.

In its July 2012 Melbourne CBD retail report Knight Frank reported that around 30% of shops are leased to food businesses, almost on a par with those leased to clothes and soft goods retailers.

Knight Frank also notes in this report that fashion and clothing stores are being replaced by “casual food concept” stores such as cafes.

The report also recorded a small increase in vacancies from 2.1% in December 2001 to 2.4% as of June 2012.

According to Knight Frank, "super-prime" rents on Bourke Street Mall range from $7,500 per square metre to $10,000 per square metre.

Prime retail rents range between $2,500 and $5,000 per square metre, while secondary retail rents range between $1,000 and $1,400 per square metre.

In its October report, HTW says that since the start of 2011 the Melbourne retail trading market appears to be undergoing a difficult period.

“Retail spending statistics supplied by the ABS suggests that retail spending is volatile and has been growing below trend for some time.

“Slowing growth in retail spending limits the rental increases payable by tenants and results in increasing vacancy rates and declining retail property values.

However, despite the uncertain retail environment, HTW says the higher vacancy rates have little effect on prime retail areas within the Melbourne CBD.

“Retail strips such as Bourke Street, Swanston Street and Elizabeth Street still have strong investor interest and remain highly sought after.

“It is anticipated that rental rates will remain relatively soft for the coming year due to the marginal increase in empty retail spaces.”