Melbourne’s famous shopping strip Chapel Street, South Yarra is seeing a new cycle of leasing activity in response to changing dynamics in Melbourne’s shopping strips.
This follows a period of landlords becoming more open to a recalibration in rents.
Fitzroys’ Lewis Waddell has secured a string of new deals. Among those, Joe Bananas, which has boutiques in Sydney and New York, has chosen Chapel Street as the location for its Melbourne debut and taken space up at 583 Chapel Street.
“Joe Bananas is another Sydney retailer to open in Melbourne recently, showing that operators outside of the city see plenty of value and upside in Melbourne’s shopping strips,” Waddell said.
He said tenants have used the shifting conditions to move within strips to secure more prime positions, or to take up larger spaces, or expand into adjoining properties.
Multiple tenants have made a shift from nearby to Chapel Street or within the strip in a sign that landlords are meeting the market and creating opportunities for tenants. National menswear tenant M.J. Bale is relocating from nearby to a larger store at 558 Chapel Street with a more prominent shopfront, taking advantage of competitive rents in the process.
Close by, fashion accessories retailer Trollbeads has moved from their shopping centre tenancy to 540 Chapel Street. They both follow fashion label Maatsuyker’s recent move from Greville Street to 574 Chapel Street.
On the other site of the street, Thurston and Howell are relocating within the strip closer towards the Toorak Road, to 495 Chapel Street.
Waddell said rental levels in some parts of Chapel Street, South Yarra had decreased to circa $500 to $600 per sqm net, and incentives increased up to 25% in some cases, although typically they are at around 10% to 15%.
According to Fitzroys’ Walk the Strip report, Chapel Street, South Yarra has actually seen vacancies come down since the beginning of COVID. The vacancy rate had lifted to 20.3% prior to the pandemic, and now sits at 18.7%. It was the only component of Chapel Street’s three precincts - also including Windsor and Prahran - to record a tightening in vacancies during that time.
Waddell said a lead-in of six to 12 months before COVID of informing property owners about changes in the market laid the groundwork for changing expectations.
“Well-informed landlords have been able to quickly adjust to new market expectations, and secure lease renewals and new retailers seeking a presence in strips.”
“South Yarra still has the fundamentals of strong, established catchment in an affluent area, an ongoing development pipeline and now, affordable rentals and strong incentive levels - this is very attractive for tenants.”
Multiple tenants have made a shift from nearby to Chapel Street or within the strip in a sign that landlords are meeting the market and creating opportunities for tenants.
“This has been further enhanced by the pipeline of new projects nearby. Jam Factory owners Newmark Capital recently brought on developer Gurner and Qualitas to take on the $1.4 billion redevelopment of the cinema, retail and hospitality complex that will create new residential, office and hotel components.”
South Yarra Square, near the Toorak Road end of the strip, is also set to be transformed after its recent acquisition by Oreana Property Group, while Goldfields is developing a new office tower at 627 Chapel Street, and US build-to-rent company Greystar owns the neighbouring sites at 14-16 Yarra Street and 35-41 Claremont Street, and a new Ovolo Hotel opened at 234 Toorak Road.
“There remains high levels of activity at the South Yarra end of Chapel Street, which has historically been and continues to be a fashion-dominated section of the street. Food and beverage enquiry remains for the south end of the street,” Waddell said.
Recent deals along Chapel Street, South Yarra have also seen fashion boutique LTRO leasing the 80sqm shop at 563 Chapel Street, while a phone repairs business leased 367 Chapel Street and a gift shop leased 369 Chapel Street.