Melbourne Carlisle
Carlisle shopping strip, Melbourne. Image supplied.
  • Recent deals across Melbourne point to a resurgence of interest in the commercial sector
  • From a shopping strip site sale to new leases being signed, and assets acquired

Despite the recent flare-up of Covid cases in Melbourne, several recent commercial property deals have pointed to a reawakening of the retail sector across the city.

Shopping strip site snapped up

Confidence in Melbourne’s shopping strips was on display with the near-$3 million sale of a premier corner site of Carlisle Street, Balaclava.

Fitzroys agents Mark Talbot and David Bourke sold 224 Carlisle Street to a local group following a competitive Expressions of Interest campaign.

Zoned Commercial 1, the 273sqm site commands a central position on the strip, and its sale was equivalent to more than $10,000 per sqm.

“Carlisle Street offers a unique blend of national tenants with a cosmopolitan and creative influence, enhanced by local bakeries, cafés/bars and services a strong and established residential catchment that is set for further expansion with a growing number of medium density developments underway and completed nearby.”

“The market is recognising the resilience of Melbourne’s shopping strips, which have been the setting for people reconnect with their local communities over the past 12 months.”

Mark Talbot, Fitzroys

Retail assets bought by SMSF investors

Meanwhile, investors looking to shore up their income stream have been looking at strata-titled Melbourne retail assets with long leases.

Fitzroys’ Chris Kombi and Ervin Niyaz sold four shops within Mosaic Village, Lalor, for a combined $2.6 million.

Mosaic Village Lalor
Mosaic Village, Lalor, Melbourne. Image supplied.

The properties range in floor area from 54sqm to 101sqm and sold at an average yield of around 5%. They included Old Socks Laundrette on a 7+5-year term, a shop leased to Fatwraps for 7+7 years, another leased to Lord of Dough for 5+5+5 years and one leased to Mosaic Convenience Store for 10+5+5 years.

The properties were snapped up separately by SMSF (self-managed super fund) investors within two weeks of each other.

“Investors remain on the look-out for assets with secure income during the uncertainty of the COVID era, while the Reserve Bank has flagged interest rates will remain at their historical low for some time, and the share market presents volatility,” said Chris Kombi.
The glacial CBD retail market is also beginning to see some action, with three leases finalised in different parts of the city.

Retail leasing

In addition to this, three retail leases were renewed by the same commercial agency along Collins Street, and up on Swanston Street. A rental rate of $5,000 per sqm was achieved on one 33 sqm space.

“Despite the universities still in the process of reopening, occupancy levels in this north section of Swanston Street are very high with only three or four shops still to reopen post the COVID shutdown,” James Lockwood said.

Melbourne CBD
CBD retail leasing, Melbourne. Image supplied.

In a sign of positive news to come, Fitzroys has several other CBD retail leases close to finalisation.

“These deals did not involve substantial discounts on rents being paid pre-COVID. In other instances however, compounding annual increases in previous years have seen rentals get ahead of market levels and in some cases rental reductions of up to 30% and sometimes more have been necessary to generate tenant interest,” said Lockwood.

“Incentives are also still an important part of the transaction but the main thing is that we have enquiry – and most of this is from quality retailers with good experience and often multiple outlets that we are comfortable to recommend to our clients.”

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