Student accommodation and residential development driving generational retail change in Melbourne CBD’s north:
Rents are being pushed to unprecedented levels as operators, led by Asia-based hospitality businesses, lead the rush to take advantage of the student accommodation and residential development boom in the north of Melbourne’s CBD.
In the latest deal, Fitzroys Associate, Alex Shum leased 299 Elizabeth Street to international bubble tea brand Prime’s Hai, at a record rate for the area of $3,150 per sqm. The off-market five-year deal with a five-year option for the 73 sqm space was struck at an annual rent of $230,000 net.
“The northern part of the CBD - especially along Swanston and Elizabeth Streets - is becoming increasingly sought after and targeted by Asia-based franchises who are well- known overseas.” Shum said.
“They want to get into the location as they are familiar to the large numbers of students in the area. These are brands that university students living in the surrounding high-rise developments will recognise and love from back home.”
The precinct is well supported by the surrounding student accommodation buildings and complimentary Asian food businesses, and is within close proximity to the Queen Victoria Market, Melbourne University and RMIT University.
Shum said the boom in student accommodation and residential development in recent years has subsequently driven competition between tenants and a rental rate surge.
Rents for a typical shop of up to circa 100sqm along Elizabeth Street were being leased at around $1,500 to $1,700/sqm in 2017, and were now commanding around $2,500 to $2,700/sqm – reflecting growth of more than 30% per annum in that time.
Shum and Fitzroys colleague Terence Yeh recently leased the 200sqm double-fronted building at 423-425 Elizabeth Street to dessert house chain Hui Lau Sahan from Hong Kong, at a precinct record of $400,000 per annum net on a 10-year lease, reflecting a a sizeable uplift on the previous terms struck for the property.
Data from the Department of Education shows international tertiary and post-secondary student enrolments in Victoria have jumped by nearly 44% in the past three years to almost 270,000.
The pipeline of new purpose-built student accommodation projects in the northern CBD comprises several by major global players Scape Student Living, Journal Student Living, GreenFort Capital and Wee Hur, while the Iglu and Atira projects have just been completed. Offshore player Cedar Pacific has just acquired development sites on Wills Street and La Trobe Street, to go with its North Melbourne and Carlton sites opening this year.
According to analysis of Melbourne City Council data, there are nearly 13,700 apartments in the northern CBD area above Bourke Street that are either under construction of have been approved.
“We are seeing a consistently high level of demand from experienced Asian food and beverage operators actively seeking suitable shops in the precinct for long-term leases,” Shum said.
“The Chinatown precinct has traditionally been designated as the hotspot for Chinese and other Asia-based operators. But this focus has organically shifted in recent years, and the current boom has in a sense created a new Chinatown in Melbourne’s CBD.”
Other recent deals have seen international Chinese restaurant chain Orient Hot Pot take up the former Jaycar site; Da Long Yi and New Life join Asian cuisine operators Shujinko Ramen, Hot Star Chicken, Gong Cha, Torosan Ramen, Nene Chicken, Sushi Hub, Da Long Yi, Gotcha Tea and renowned Chinese BBQ restaurant Rose Garden in the area.
The Age and Australian Financial Review on the move:
Following last year’s merger of Nine and Fairfax Media, The Age and the Financial Review newspapers will relocate from Media House, at 655 Collins Street on the corner of Spencer Street, to Nine’s headquarters at 717 Bourke Street.
The 16,600 sqm Media House was custom-built for Fairfax by Grocon in 2009, and is now owned by GPT Wholesale Office Fund.
3AW and community newspapers remain, operating from the top of the building. Existing tenant NBN Co, which occupies levels 4-6, has signed a sublease over 5,600sqm across levels 1-3 beginning from July. Staff will be relocating from 7,500sqm at 750 Collins Street, while NBN Co has recently taken up 20,000sqm at Tower 5 of Walker Corporation’s Collins Square in addition to its 14,000sqm at Melbourne Central.
Disclosure:Fitzroys Property Wrapis for information only on transactions in the Melbourne property market. Fitzroys provides this information as a public service. We are not purporting that all sales and leases within this report were transacted by Fitzroys. Terms/Privacy © Copyright 2019 Fitzroys.