Urban Melbourne recently spoke with Fred Nucara, Beller Group’s Commercial Director, in order to understand the story behind the story regarding their recent release of comprehensive research into Melbourne's premier retail shopping strips. In a system similar to Urban Melbourne's citywide crane count, the Beller team actively traversed Melbourne's shopping strips in order to collate the most accurate retail snapshot possible.
Over two data gathering periods, namely December 2013 and September 2014, Beller Group collated and compared data on 28 separate popular retail shopping strips throughout Melbourne in order to glean an understanding of market conditions, including current vacancies and leasing data.
During the discussion, pertinent points were made on several topics which are discussed below:
Strip retail vacancies have become more reflective of the location and immediate dynamic rather than a particular overarching pan Melbourne factor. While certain markets have excelled over the data period with lower vacancies, other have ballooned for one reason or another.
So many factors come into play over the different retail strips; differing council bylaws, demographics, transport links and car parking accessibility are but a few factors that create such diverse trading conditions. The 'markets within markets' sentiment is best demonstrated via the table below which carries select figures taken from the matrix in order to highlight the disparity from one retail strip to another.
|Location||No. of Shops||Vacancies Dec 2013||Vacancies Sep 2014|
|Bridge Road (Church > Burnley)||163||16||46|
|Bridge Road (Punt > Church)||176||30||13|
|Brunswick St - Fitzroy||226||12||17|
|Centre Road - Bentleigh||179||13||6|
|Fitzroy St - St Kilda||66||6||12|
|Puckle St - Moonee Ponds||107||5||11|
|Toorak Road - South Yarra||194||0||12|
|Burwood Road - Hawthorn||243||23||16|
|Whitehorse Road - Balwyn||202||0||11|
As has been covered on Urban Melbourne previously, Smith Street Collingwood and surrounds are in the grip of a sustained apartment boom, and this is key to generating a wave or retail activity. Rents in the area have almost doubled in the past six years and this can be explained in part by the increased development activity.
Planned development aside, projects actually under construction and rising above and around Smith Street look to be the trigger for increased retail activity. Developments are beacons of pending high-density living, affluence and more importantly, potential customers according to Fred Nucara.
Bridge Road has become somewhat of a problem child in recent times, owing the a number of factors. The decline of this High Street strip has been covered by Urban Melbourne previously, and Beller Group's research shows there are currently 59 vacancies running the length of the strip.
No longer the domain of traditional warehouse fashions, Bridge Road finds itself up against the might of an ever improving CBD retail scene and DFO centres which bring with them ease and convenience. This has resulted in diminished patronage.
Quizzed as to how Bridge Road's retail doldrums could be solved, Fred Nucara suggests a fundamental shift is needed to reinvent the strip. He suggests this is best achieved by a united effort which includes council, property owners and retailers sitting down and charting out a plan to reinvent and reinvigorate.
The increased level of apartment activity (both planned and under construction) will go some way to reshaping the type of retail found on Bridge Road for reasons described above, yet that is some time off.
Asked whether increased vacancies are in part a result of landlords demanding unrealistically high rent in certain areas, Fred Nucara states there's no firm evidence of that at play overall. It's not as simple as landlords being attuned to a certain level of income with no scope for rental reductions, but other issues such as reevaluations and servicing a loan on the premises come into play from the owners perspective.
Landlord difficulties can potentially lead to a breach of loan covenants should a certain level of rental income not be gained or maintained over a period of time. Just another factor at play when considering the retail big picture.
While the table above alludes to overall increased retail vacancies throughout Melbourne's suburban retail strips, Fred Nucara predicts an increase in leasing activity into the Christmas period. Now is the period to secure leasing deals for 2015 while an adjustment in realistic expectations may also be on the cards for both retail sales and leasing.
Fred Nucara expands on this point by suggesting that a degree of short term pain may be required from the landlord's perspective in order to secure income over the next 3-5 years, with the expectation of healthy long term gain thereafter.