Changes to Melburnians’ Lifestyles Support City’s Famous Shopping Strips

Fundamental shifts in Melburnians’ lifestyles have supported trade along the city’s famous shopping strips, and helped keep vacancies close to long-term lows, according to Fitzroys’ latest Walk the Strip report.

Vacancies came in at 6.3% in 2024, only a sliver above last year’s long-term-low of 6.2% - and clearly under the long-term average vacancy of 7.4% - as the strips experienced a period of stabilisation in the face of high inflation, high interest rates, and a cost-of-living crisis.

Fitzroys’ Walk the Strip has been running since 2017 and is the industry standard for data across Melbourne’s key shopping strips. This year’s edition details the vacancy rates and tenancy make-up of 37 strips.

Of the 37 strips surveyed, 26 – just over 70% – recorded a vacancy rate below the long-term average. The number of strips that saw an increase in vacancy and those that saw a decrease in the past year was essentially evenly split.

“Regardless of what’s been thrown at them, our strips have remained our favourite places to live, work and play,” said Fitzroys Associate Director James Lockwood.

“Melbourne gravitates towards its strips.”

Fitzroys’ 2024 edition of Walk the Strip also showed:

• Food and beverage rebounded, following on from its strong showing during the pandemic, and now makes up 30.9% of strips.
• Service retail lifted again, to a near long-term high of 28.1%, as the pandemic-era concerns of close contact with other people continued to dissipate.
• Specialty retail increased to 34.0%, pushed by the ongoing outperformance of heavyweights Church Street, Brighton and High Street, Armadale.
• The proportion of development sites dropped by 1.5% to just 0.7%, as a number of projects reached completion.
  

“Melbourne’s strips are experiencing a period of stabilisation,” Lockwood said.

“Rarely have they had a more even complexion of offerings between specialty, service and food and beverage, and there are hints that they have reshaped back towards a similar mix that was seen pre-pandemic.

“However, the context of the economic climate is markedly different. Melburnians have been facing high inflation, high interest rates and a highly publicised cost-of-living crisis.

“What has kept the strips thriving are the fundamental changes to the way we live our lives in 2024. Working from home is the main driver, which has supported suburban business as greater numbers of Melburnians go to their local villages to get a coffee, something to eat, go to the gym or do a Pilates or yoga session, or get their hair and nails done.
“It’s also that feel-good factor that we’ve seen post-COVID. People still want to be able to treat themselves and feel good about themselves. And they’ll do that by popping down to their local village.”

Barbers and hair salons have been particularly prominent in leasing deals, Lockwood noted.

“Concerns about person-to-person contact have dissipated, and service users have continued to take up space and are back to nearly an all-time high. And often where some services, such as dentists, radiologists and physios, were once at the periphery of a strip or in level one spaces, they’re now taking more central and prime street level spaces.”

Lockwood said, “Surging population growth has also been a major driver in supporting the sheer number of people spending time in our strips.”

Melbourne’s population grew by 3.3% year-on-year, according to the most recent Australian Bureau of Statistics data, or an increase of 167,500 people.

“At a time of flexible working arrangements, more people are looking for places in Melbourne where they can live, work and play.

“That ultimately means more people spending more of their time in our strips.”

This year’s Walk the Strip data shows that developments that have been under construction in recent years have reached completion, boosting the immediate residential population and spending power on the strips.

“Developments right on the strips represent countless other projects that have been undertaken in the close surrounds, there is clearly demand for residential product close to shopping, eateries, coffee, beauty salons and fitness offerings.”

A residual spike in hospitality tenants seen during and immediately after the pandemic effectively accounts for the margin in vacancy being lower than the long-term average.

“Hospitality tenants continue to be the most active in our enquiry and in our deals. The trend began during COVID when tenants began snapping up smaller fitted-out spaces, which provided a capital- and time-effective opportunity to open up to new markets within a locked-down Melbourne that had seen a huge increase in demand for takeaway meals.

“People need to eat, and the shift towards takeaway meals – whether they’re picked up by the customer or delivered via services such as Uber Eats – has continued to support hospitality trade. Businesses continue to look for opportunities to take advantage of this, as well as capture new markets.”

Hospitality tenants who have recently taken up space in Melbourne shopping strips noted there is a high demand for quality products in the market at the moment, and highlighted the importance of delivering the right products to the right audience by understanding location demographics and consumption patterns. Market gaps for specific hospitality offerings are also a significant driving factor.

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The 899 Collins Street project will be developed, built and managed by Lendlease, with Nippon Steel Real Estate taking a 40% share.

Lendlease last year partnered with Japan’s biggest homebuilder, Daiwa House, on its $650 million build-to-rent tower at Melbourne Quarter, to be built at the western end of Flinders Street.

Melbourne is currently home to the most build-to-rent projects in the country, and Docklands is set for several major developments in the growing sector. Earlier this year, the state government approved AsheMorgan’s 925-apartment project – one of Australia’s biggest – at 24 Little Docklands Drive. Meanwhile, Gurner and Liberman family-backed joint venture partner City Harbour are planning for a build-to-rent component with the 1,350 apartments of its $1.7 billion Elysium Fields project on Harbour Esplanade, and Samma Property Group was given the green light for a $250 million tower next to the Bolte Bridge that will also include build-to-rent.

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The 453 New Street property including the heritage-listed, 1859-built mansion Tullavin, which the local buyer plans to occupy. They will subdivide the balance of the land into several lots to sell down.

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The 3,015sqm, 9-storey office building at 411 Collins Street was constructed in 1930 in the modern Gothic style and was formerly home to Roy Morgan Research. In recent years it underwent a $6.2 million upgrade.

Alibaba occupies a full floor of the building, which is 65% leased. Other tenants include workplace provider Axiom, prop-tech company Buildxact, legal software provider Plexus, architect Hames Sharley, and private equity firm Stonehouse Corporation.