Rents are coming down on Little Collins Street as retailers struggle to service the once high rents commanded on the strip.
After reaching highs of around $4000 a square metre in the core between Swanston and Elizabeth streets, agents are starting to persuade landlords they’ll have to take a cut to between $3200 and $3500 to get new tenants.
English retailer Debenhams will unveil its first Australian store in St Collins Lane. Photo: Nicole Lindsay
The mood comes just four years after fashion designer Bettina Liano quit her store at 269 Little Collins Street claiming it cost twice as much to rent in Melbourne’s CBD as it did in Soho, New York.
A shop in Howey Place has been re-let at $125,000 a year, down from $160,000 a year, while the rent at another 35 sq m boutique has come down to $90,000 a year from $100,000.
A 50 sqm store at 146 Little Collins St has leased to shoe retailer BeautiFeel for $1900 per sq m gross plus GST, in a deal brokered off-market by CBRE’s Zelman Ainsworth, Samantha Hunt and Tan Thach. Photo: Supplied
These days, a string of empty shops dot the strip from Spring to William streets, with still more vacancies in some of the arcades along the way, most notably St Collins Lane – 29 in all.
The newly-developed arcade that replaced the Australia on Collins development still has four vacancies on each of its three floors.
Three separate Ugg stores on the street have shut. The dismal mood seems counter to news of the CBD historic low vacancy rates – 2.4 per cent this time last year, according to Knight Frank and 3.3 per cent by the end of the year, according to Savills Australia.
Savills’ survey found there were 39 empty shops among the 1181 retail spaces in the CBD at the end of last year. At this rate, Little Collins Street alone, once a thriving boutique strip, could account for a solid majority.
The reasons are not complex. New research from the City of Melbourne shows nearly 130,000 city residents spent $1.34 billion on shopping and dining out last year – up 19 per cent – and city workers forked out a further $1.17 billion, up 13 per cent since 2013.
While the boutiques and cafes and bars in the lanes sprouting off Little Collins were among the pioneers of the city’s renewed culture, there are now many more places for the city’s residents and workers to spend their money. The number of shops increased last year alone from 1132 stores.
Colliers International retail agent Cam Taranto said there are now more places in the city for people to shop and eat out with the student-dominated strips around Emporium and the new office precincts in the western end of the CBD.
“You can get a good meal or coffee anywhere in the city now. Office workers, in particular, can now get a coffee and a sandwich where they work instead of coming into the core,” Mr Taranto said.
The recent failure of a number of fashion chains, including David Lawrence which took over the old Jigsaw space at 289 Collins Street, has not helped.
“The local fashion market hasn’t been as strong as it used to be and some retailers, unless you’re one of the big players, haven’t been able to service the high rents,” he said.
One agent said it was just a matter of bad timing that so many shops had emptied at the same time.
“Several long-term leases had run out at the same time. Enquiry is strong,” he said, but noted rents had definitely come down.
Fitzroys agent Jordan Ceppi said both his Little Collins street precinct shops were under offer.
“The landlords are becoming more responsive to the market,” Mr Ceppi said.