Tenants eye better stores as vacancy opens new shop locations

The rent pendulum is swinging towards tenants in Melbourne’s suburban shopping strips as rising vacancy encourages retailers to hunt for better locations.

In the South Yarra end of the popular Chapel Street shopping strip several tenants are taking up new premises after landlords were forced to recalibrate rents as a result of the pandemic.

Tenants are taking advantage of the COVID disruption to snare prime positions.Credit:

Menswear retailer M.J. Bale is relocating to a larger store at 558 Chapel Street, with a more prominent shopfront, taking advantage of competitive rents in the process.

Jeweller Trollbeads has moved from a temporary tenancy in Westfield’s Fountain Gate shopping centre to a stand-alone store at 540 Chapel Street.

Trollbeads Jono Gelfand, who opened the Danish jewellery brand with his partner Mikkel Monberg earlier this year, said the attitude of their new landlord helped seal the deal.

“We’ve had such incredible support from the landlords. They have been phenomenal. Very accommodating, super easy to deal with,” Mr Gelfand said.

Fashion label Maatsuyker is also a newcomer to 574 Chapel Street, having recently moved from nearby Greville Street.

Tenants are taking advantage of the COVID disruption to snare prime positions, take up larger spaces or expand into adjoining properties.

Fitzroys’ Lewis Waddell said rent levels in some parts of Chapel Street, particularly towards the South Yarra end, are down to around $500 to $600 per square metre net, while incentives at times have increased by up to a quarter, although they were more typically hovering around 10 to 15 per cent higher.

Mr Waddell’s agency tracks retail vacancy across 35 of the city’s best-known shopping streets. Its latest Walk The Strip survey shows an average uptick in vacancy of 2.6 per cent across the board.

The survey shows food and beverage was the best performing sector as click-and-collect deliveries surged during the pandemic.

Chapel Street’s vacancy at the South Yarra end rose above 20 per cent mid-pandemic last year but has since dropped back to 18.7 per cent this year. At the Windsor end of the street, fewer shops are now closed than before the pandemic.

Veteran retailer Peter Sheppard, a Chapel Street landlord and the owner of two retail shops in Burke Road, Camberwell, said he had given rental discounts on all his properties.

“Our two shops in Burke Road Camberwell are let at COVID prices. They are probably 40 per cent off what you would normally get,” he said. “When this COVID thing is over and lease renewals come up we can get some more realistic rentals.”

Mr Sheppard is leasing his Chapel Street store, formerly occupied by Solomon Lew’s Just Jeans, to denim fashionista Bettina Liano also at reduced rent.

“I’d prefer to have that than be like my neighbour who has got an empty shop, dusty papers in the window and notices on the door,” he said.

Mr Waddell said fashion retailer Joe Bananas, which has boutiques in Sydney and New York, chose Chapel Street for its Melbourne debut store where they took space at 583 Chapel Street.

Some shopping strip landlords have avoided the COVID disruption.

In Church Street, Brighton, the only available shop is a lease assignment, leaving the strip with a vacancy of just 0.7 per cent. More than half of the strip’s tenants are speciality retailers, with recent new entrants including Assembly Label, Store Chance and Oroton.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Simon Johanson is a business journalist at The Age and The Sydney Morning Herald.

Share this post