Melbourne smells of renewal as Italian perfumer sets up shop

“There is a renaissance taking place in Melbourne’s CBD retail arcades,” Lockwood said.

Australia’s second-largest retail landlord Vicinity Centres, the owner of Emporium Melbourne, told investors this week its city-based malls were lagging the rest of its portfolio. Sales growth in CBD locations didn’t quite achieve the portfolio-wide average of 20 per cent versus 2019, but nevertheless grew a healthy 7.4 per cent.

The group’s chief operating officer Peter Huddle acknowledged a structural change is occurring in the office workforce that is keeping the CBDs midweek foot traffic substantially below 2019 levels, although weekend traffic is heading towards more normalised numbers.

“Clearly we’re still in recovery with CBDs. We expect more normalised traffic to occur in the CBDs around financial year 2024,” he said.

“There is a renaissance taking place in Melbourne’s CBD retail arcades.”

Fitroys’ James Lockwood

This has not stopped big name retailers from positioning themselves in the CBD. And, unlike street front stores, Emporium Melbourne has few vacancies, Huddle said.

“We’re writing longer-term leases, making sure we get those flagship tenancies in our CBD locations,” he said.

“We have targeted flagship retailers or first-to-market retailers that can’t necessarily be found in the suburbs. They’re looking to consolidate in the CBDs.”

While foot traffic is lower, leasing activity is robust and Vicinity said it is confident of recovery in its premium city assets.

Melbourne Central owner, GPT Group, also reported sales per square metre were near pre-COVID levels.

GPT’s head of retail, Chris Barnett, told investors last week sales in the centre were up 37 per cent in the first half of the financial year and “we have seen a continued improvement in centre visitation.”

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The La Trobe Street mall is benefiting from the return of university students, with fashion, dining and tech retailers all exceeding their June 2019 results.

CBRE’s Jason Orenbuch said demand from tenants for high-end hospitality venues is rising, particularly in well-established culinary locations.

Orenbuch said leasing requirements for part or fully fitted retail spaces are also in demand. Prime locations are proving to be resilient and leasing faster than secondary sites which are slower to recover.