Enquiry up, vacancies expected to come down

The face of Melbourne CBD retail has been through multiple phases since COVID and into 2023.

“Citywide, we’ve seen changes across the board from a tenant profile perspective” Lockwood said.

“Over 2022, the first quarter saw an influx of specialty retailers take up leases in the CBD Core as clothing brands sought to redefine their instore offering and take up central city positions. As we moved further out of restrictions mid-year, we noticed enquiry increase from hospitality operators with the overall long-term perspective from tenants become increasingly positive.” As evidenced by Fitzroys’ recent deals, suburban operators have been taking advantage of good opportunities.

“The CBD leasing market has been very positive so far this year, with an upbeat sentiment driving demand. Business confidence rose again in January 8 and there is anticipation of growing office occupancy, tourist and student numbers in the Melbourne CBD.

“Food and beverage tenants are still making up the majority of the enquiry, but we have seen a larger influx of specialty and service retailers looking to expand into the CBD or relocate in to more prominent positions compared to this time last year.”

Service retail has seen a large drop as a proportion of enquiry amid the rise of food and beverage tenants and pubs, but existing businesses are seeing more customers come into the CBD for a haircut or to spend time at a beauty salon, perhaps get a coffee, and then go straight home, Lockwood said.

The CBD Core remained strong throughout 2022, with Fitzroys data showing vacancies in the broader block bound by La Trobe, Russell, Flinders, and Elizabeth Streets at 17.1%.

Fitzroys data includes all shopfronts within the designated precincts, including shops with ground-floor street frontage that are within shopping centres such as Emporium and St Collins Lane. Lockwood said some tenants have moved from shopping centre spaces to streetfronting space, including Bremont Watch Company, which moved from Collins Walk to a street-fronting space at St. Collins Lane.

Major vacancies have emerged in Elizabeth Street and Swanston Street as landlords held back from meeting the market. Rents had gone up consistently in the CBD, and had no adjustments and fluctuations in the same way the suburbs had.

The northern end around La Trobe Street has performed well, in line with the gradual return of university students to Melbourne University, RMIT, and other institutions, and the return of the international cohort that lives and studies in the area.

8 https://www.roymorgan.com/findings/9153-roy-morgan-business-confidence-january-2023