Melbourne CBD hit hard as leasing vacancies bite

Melbourne’s CBD is Australia’s most damaged commercial property market, with more shops listed for lease than anywhere else in the country during the pandemic.

A whopping 108 retail and hospitality shops have sought new tenants since coronavirus first reared its head in March, according to realcommercial.com.au.

Collins Street, Bourke Street, Elizabeth Street and Swanston Street have taken the biggest hits, hosting half of the inner-city’s new vacant listings.

REA Group chief economist Nerida Conisbee said a “double dose of lockdown” meant the city had cleared out much more than Sydney’s CBD, where 86 shops had come up for lease, and that of Adelaide, 58, and Brisbane, 44.

15 Collins St was vacated by clothing brand Wolford.

There had been a 40% spike in vacancies nationally since the same time last year, with Melbourne bearing the largest burden of lost business.

“There are obviously big problems in the city at the moment because people are unable to travel there,” Conisbee said.

“But the bigger problem is a long-term issue about how many people will actually return to the office.

“The situation is leading to a high level of business failure, so many are closing as a result.”

Royal Arcade shops 43 and 45 are up for lease after clothing retailers vacated.

The iconic spot is still looking for a tenant.

Iconic locations, including two retail outlets at the heart of the Royal Arcade, have also lost tenants during the crisis.

CBRE commercial leasing agent Zelman Ainsworth said he successfully filled a landmark cafe space at 241 Flinders Lane in the midst of stage four lockdown, noting some retail and hospitality businesses were moving rather than entirely closing down.

“Major retailers are looking to understand what opportunities there are to relocate or reposition shops into better quality locations, with more affordable and flexible terms,” Mr Ainsworth said.

“I’ve done a number of deals this year where the tenants are just moving across the road or next door after they reassess.”

He said landlords needed to “work together with retailers on tenure and commercial terms” to fill their empty shops.

Owner of Docklands cafe The Espressonist, Demian Gibbins, has managed to keep his cafe open during lockdown. Picture: Jake Nowakowski

The Espressonist cafe and wine bar director Demian Gibbins said the CBD had become “a ghost town” since the first lockdown.

He added “the impact of the first lockdown was minor” compared to the second shutdown with its stage four restrictions.

“The majority of shops are closed with only a few continuing to trade for takeaway,” Mr Gibbins said. “It’s quite confronting walking through the CBD as a hospitality business owner at the moment.”

His own eatery at Yarra’s Edge had been “decimated” when dine-in service was banned, but the business had pivoted to takeaway fish and chips to get customers through the door.

“We were fortunate we had a takeaway coffee trade to build upon,” Gibbins said.

“I cannot imagine what restaurants that had no takeaway are feeling through this time, as starting takeaway from scratch isn’t as easy as it sounds.”

A cafe space at 241 Flinders Lane was recently re-leased.

Shops have emptied out along Chapel St. Picture: Asanka Ratnayake

Outside the city, shopping hot spots St Kilda, South Yarra, Richmond and up-and-coming Dandenong experienced the largest spikes in new vacancies, with more than 20 new rental listings each since March.

Collings Real Estate head of property management Caleb Pikoulas said Chapel Street shops in particular had been “pretty much empty for a year”.

“Chapel Street was already struggling a little bit before the pandemic,” Mr Pikoulas said.

“So now with the pandemic, a lot of businesses have thrown in the towel even if they still had some minimum allowances for takeaway.”

High Street in Northcote, Smith Street in Collingwood and Malvern Road in Melbourne’s inner southeast were also experiencing serious difficulties, he said.

This article from the Herald Sun originally appeared as “Commercial lease vacancies: Melbourne CBD hit hardest”.