Melbourne CBD Retail Vacancies Down Amid Post-Pandemic Transformation
Retail vacancies across the Melbourne CBD’s key shopping and hospitality precincts nearly halved over the past 12 months as the city moved further through its post-pandemic transformation – and there is good cause for optimism ahead as construction sites in key pockets are set to reach completion and become new hives of activity.

According to Fitzroys’ latest Walk the CBD report, retail vacancies in the CBD came down to 8.7% across its key retail precincts, from 15.5% a year earlier, with the take-up of space by hospitality, food and beverage and entertainment operators the key driving force.

“Retail has admirably weathered this critical period for Melbourne,” said Fitzroys’ James Lockwood.

“Retail has dealt with the pandemic and its lockdowns, the resulting shifts in office worker routines and changes to CBD shopping, dining and lifestyle habits, as well as key pockets of the city effectively being shut down long-term for construction projects,” he said.

“As the city settles into a new rhythm of live, work and play, we expect a bright period ahead for Melbourne CBD retail.”

The proportion of hospitality and food and beverage tenants in the CBD jumped from 34.1% to 40.9% of all surveyed spaces. Service retail lifted modestly to 16.7% and specialty receded slightly to 31.8%, while the proportion of space undergoing development was steady.

Among the strips and precincts, the eastern stretch of Collins Street – the city’s famed Paris end, home to a roll-call of international luxury heavyweights – retained the lowest vacancies, at just 2.6%.

Swanston Street was the biggest mover, with vacancies plummeting from 18.7% to 3.4% as the proportion of food and beverage tenants surged from 34.8% to 51.0%. Lockwood said this was perhaps the best example in the CBD where rents have bottomed out, owners are meeting the market, and tenants are seeking to take the opportunities to get into a bustling strip in anticipation of the opening of the Metro Tunnel next year, which will bring yet more pedestrian traffic. Korean fashion label Tom’s Project has set up at 137 Swanston Street, while Sushi Hub, Smolbitez Waffle and Fortune Alley Swanston are among the many new food and beverage tenants.

Lockwood said, “There’s been a lot of scaffolding and a lot of construction going on.”

He said the Metro Station works along Swanston Street had for several years now taken chunks out from Federation Square up to Collins Street, and further north around the State Library.

“The city’s really looking forward to the Metro Tunnel works being completed. That’s taken some key pockets of the city out of action for a long time, but these major construction sites are set to become hives of activity nearly overnight that retailers and hospitality operators will really be able to thrive off,” Lockwood said.

The Metro Tunnel project is due to be completed in 2025, one year ahead of schedule.

Lockwood said, “The ongoing return of international students has brought a real buzz to the CBD, and there’s been ongoing momentum in the food and beverage sector, while landlords have been more willing to meet the market on rents. Together with the anticipation of the completion of the Metro Tunnel, that’s all come through in the vacancy data.”

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.

The latest reported Melbourne City Council pedestrian data showed the first two months of 2024 recorded the highest CBD foot traffic levels since 2015. Saturday is the busiest day of the week, followed by Friday – as Melburnians and tourists come into the city for hospitality, lifestyle, shopping and entertainment. Pedestrian activity near Town Hall, at the corner of Swanston Street and Collins Street, is 3% higher than was last year – which was up 22% on 2022.

A new report to the Melbourne City Council’s Future Melbourne Committee, Mainstreaming Twilight Trade, showed there are now more consumers, workers and visitors in the city between the hours of 5pm and 7pm than between 8am and 10am, suggesting a shift towards later trading amongst the CBD’s 4,500 retailers.

According to the Council, the City of Melbourne has about 21,000 retail workers who generate about $1.8 billion in output.

Chanel Buys Melbourne CBD Building Home to Boutique
The owner of Chanel, the Wertheimer family’s Mousse Investments, has acquired the Melbourne CBD building home to the luxury retailer’s boutique for $75 million.

Chanel signed a lease over the building in 2014 that included an option to purchase the 6-level building at 42 Russell Street, on the corner of Flinders Lane.

The vendor was David Marriner, founder of Marriner Group, which operates 5 theatres in the CBD. He paid $7.4 million in 2009 for the building – which was constructed in 1923 for the Royal Bank of Australia – and added 2 floors to the original 4-storey property.

Last year, Chanel’s rival LVMH bought the former Ivy nightclub building across the road at 145-149 Flinders Lane for $39 million, where it is expected to set up a new multi-level Christian Dior flagship.

The Paris end of the city continues to attract a long list of names clambering to join the long roll-call of global luxury retailers headlined by Louis Vuitton, Gucci, Versace and Cartier.

Around the Chanel building at the corner of Russell Street and Flinders Lane, momentum is gathering. Spanish luxury brand Loewe and high-end jewellery retailer FRED – both owned by LVMH – recently moved into Flinders Lane and Russell Street-fronting shopfronts respectively within Pembroke’s T&G building at 161 Collins Street, home to Gucci, Versace and Bottega Veneta.

Meanwhile, tenants such as Rolex, Sarah Sebastian and Dion Lee have been pulled along Exhibition Street due to the premium hotels in the east end of the city.