Specialty retail, hairdressing and beauty salons lead shopping-strip revival
Shopping strips in Melbourne have rebounded handsomely from the pandemic slump, recording the lowest vacancy rates ever seen.
From Brighton to Moonee Ponds, Armadale to Carlton, Richmond to Camberwell, boutiques, stores, cafes, restaurants, hairdressers, nail salons and supermarkets have been moving in and reinvigorating many of the city’s best-known streets.
“Melbourne’s shopping strips are doing really well,” said James Lockwood, division director of agency Fitzroys on the release of its latest Walk the Strip report. “We’ve been doing these reports for eight years now and we’ve hit the all-time lowest average of 6.2 per cent vacancies.
“Some of them have clocked up the lowest we’ve ever seen – like Church Street, Brighton, at 1.1 per cent and Hampton Street, Hampton, at 1.8 per cent – and the total average is down from around 10.3 per cent during COVID in 2021.”
The reasons for the strips coming back into their own are as varied as the wares they sell. Working from home and hybrid working, with people often spending two days at home, have certainly enlivened many strips as staffers have breaks going out for coffee and doing some casual shopping at the same time.
In addition, the number of residential developments being undertaken above strip hubs has also helped boost confidence with the prospect of new residents shopping locally. Over the past 12 months, there were 2.2 per cent more strips earmarked for mixed-use lifestyle developments.
For instance, High Street, Armadale – possibly Melbourne’s most popular and busiest shopping strip, with a 2.3 per cent vacancy rate – has five projects on the go, for a total of 115 new units. The stores that are moving in tend to reflect that kind of demographic, such as Sydney butcher Victor Churchill, Japanese salad company Fishbowl and Ned’s Bake.
South Yarra also has the 400 apartments of the Jam Factory starting construction, Glen Huntly has a 140-unit project and Monee Valley has 2000 new dwellings about to go in.
“Some of the local councils are also being very active in reinvigorating their areas,” said Lockwood’s fellow Fitzroys director, David Bourke. The shopping centre, he adds, has been “really activated” by a co-working space. “There aren’t too many vacancies down there!”
Meanwhile, Boroondara Council has embraced outdoor dining and installed permanent outdoor seating along part of Camberwell Road to activate those sections.
Overall, vacancies have fallen another 0.5 per cent from the long-term low reached in 2022, 1.5 per cent below the long-term average of 7.7 per cent.
In Moonee Ponds, Puckle Street is now down to 3.9 per cent from 8.8 per cent in 2019, although Bridge Road, Richmond, is still at 7.6 per cent.
The Fitzroys report found that specialty retail was the major mover, with the proportion of fashion, clothing and footwear, bridal and jewellery tenants increasing by 2.5 per cent to 33.4 per cent. In total, 72 per cent of strips saw an increase in specialty retail, to make up just over one-third of all shops along the strips.
Service retail, including hair, nail and beauty salons, fitness studios and gyms, and medical and allied health services, came back to 27.9 per cent, with 64 per cent of strips seeing an increase. At the same time, food and beverage decreased by 3.1 per cent to 30.3 per cent, with 78 per cent of strips seeing a small decrease in the sector.
“We had seen a huge increase in food and beverage because, during lockdown, so many embraced a takeaway model,” Lockwood said. “That’s now decreased a little bit with so much competition. They’ve struggled if they’re not at the top of their game.
“Service retail like hairdressers and beauty salons obviously had a difficult time during the pandemic but now they’ve resurfaced. It’s human nature to want to look after yourself and it’s a great way to deal with stress.”
One of the biggest Melbourne strip leases of 2023 has been at Camberwell Junction, with a 430-square-metre building at 169 Camberwell Road being leased to a restaurant group from China for 10 years and $165,000 per annum net.
“This property has a long history as a restaurant venue and is ready for its next chapter with a quality operator that has a successful track record,” said Fitzroys senior manager Tom Fisher.
“Melbourne remains a global favourite among hospitality operators and Camberwell Junction’s reputation as an excellent place for trade, supported by an enviable established and growing affluent catchment, evidently reaches overseas.”
Another substantial lease there was signed by the hospitality operator Fishbowl for 672 Burke Road on a long 7+7-year term at $110,000 per annum net.
As vacancies have fallen, and business continues to perform strongly along most strips, rents have also tended to firm up, Bourke says. The beauty of strips over shopping centres is that they have multiple owners so there’s a lot more room to negotiate individual leases with a greater diversity of businesses.
“We’re seeing a bit more growth as vacancies come back,” he said. “But, just like the office market, we’re tending to see three-year terms becoming more prevalent than five years, with more lease-break provisions built into contracts. We’re also seeing yields continue to firm.”
