Melbourne’s Chapel Street has long been a hot spot for independent boutiques and Australian retail brands, but Leasing Information Services Victorian Distributor Amos Fischmann says international names are currently searching for space on the strip.
What are the fundamentals of Chapel Street?
It is a really long retail stretch, around four kilometres long, that starts at the Nepean Highway and runs all the way through to Alexandra Avenue. The main stretch of retail starts at the Dandenong Road intersection. From there to Commercial Road there are about 1.5 kilometres of fairly ‘normal’ shopping, with Coles and Woolworths etc. From Commercial Road to Toorak Road is the main fashion store precinct.
What changes are occurring?
What has happened recently, and I think this is reflected in Oxford Street in Sydney as well, is that from being a successful fashion-based strip with a lot of independents, it has now become a destination for international firms. If an international retailer says, ‘I want to be in Melbourne’, they say ‘I have to be in Chapel Street’. A variety of retail types are interested, but I think that the vast majority is fashion.
What are retailers paying to be on the street?
At the lower end of Chapel Street, from the corner of Dandenong Road up to Commercial Road, the rents are around $650 per square metre, or even less, per annum. Rents in the main hub of the street, from Commercial Road through to Toorak Road, are usually $1000, $1500 or $1800 per square metre per annum. Obviously they are the asking prices, but they are not too far off the actual prices. There are currently around 20 leases available on the street and a couple of shops that are actually vacant. However, generally vacancies have fallen on the strip. In general, vacancies have dropped across all of Melbourne’s top 10 retail strips.
What about shop purchases?
There are some interesting sales going on, such as current the sale of 245 Chapel Street. Last year, 509 Chapel Street sold for $3.5million on a 4.73 per cent yield. Typically, if sales occur on a run-down property, the people who purchase it will renovate it and all of a sudden you will go from rent of $650 to about $1000 per square metre per annum.
In general sales have been very strong, so returns or yields on retail sales have been around the four to five per cent mark – so fairly low. However, there is a really strong demand for retail investment which may be related to the type of quality international tenants you can secure.
What is happening around Chapel Street?
Just like in Oxford Street, Sydney, the side streets have become very popular. There is Cato Street and Greville Street in Prahran, which have smaller boutique outlets. As I said earlier, because they have Coles and Woolworths and the Prahran Market, it is a fairly vibrant hub. One thing about Melbourne strip shopping is that there are lots of council car parks behind the strips which attract customers.
More broadly, most of the top 10 retail strips in Melbourne are tight. They have all had a reduction in what is available. Bridge Road in Richmond has a high turnover of leases, but vacancies have also dropped. Acland Street in St Kilda is more of a food and lifestyle strip, but they are also achieving rents of $825 to $1250 per square metre per annum.
Leasing Information Services is a Sydney-based independent online provider of retail leasing data in Australia. Visit www.leaseinfo.com.au