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Retailers think outside the box as CBD faces shortage of flagship space

Colliers International finds landlords increasingly willing to repurpose space to meet demand

The Melbourne CBD has such an undersupply of large, flagship-style retail space that landlords and agents are increasingly looking to reposition and optimise underutilised space within older buildings to meet tenant demand. 

According to Colliers International CBD retail leasing specialist Stephanie Harding, retailers are now casting the net wider in their search for flagship sites within the tightly held CBD. 

Ms Harding said despite the well documented, increasingly tight vacancy along Collins Street – which was beginning to flow through to surrounding properties – there was still a significant appetite from retailers for large flagship stores in Melbourne.

“There is an undersupply of this kind of space in the city, so anything that does come to market is hotly contested and snapped up quickly,” she said. “This being the case, we are now helping landlords and tenants to create more of this large, flagship-style space by repurposing and repositioning older, existing assets with underutilised areas.

“This not only gives retailers more options in a tightly held market but also adds value to existing, often older, buildings by increasing rent. Some of the creative solutions we have seen include connecting
car parks with lower ground floors and converting basement or service areas to create new retail space.” 

Ms Harding said a string of recent deals has seen a range of retailers, from furniture to fashion, move into converted space to achieve their desired floorspace or location.

“In a recent transaction, international furniture company Haworth have taken over 300sqm at 75 Flinders Lane, previously occupied by fashion group, Zambesi who still held a lease over the space. The deal was negotiated off-market at approximately $220,000 per annum,” she said. “Again, this highlights the demand for flagship retail space in the Paris End.

“Prior to this, we assisted streetwear retailer Culture Kings in securing a lease at 19-25 Russell Street, repositioning an old Chinese Theatre totalling 600sqm behind the Forum Theatre.

“This was the first time we saw premium fashion brands operate in non-traditional retail strips within the Paris-end of the CBD, due to the low vacancy along Collins Street.”

Colliers International negotiated this deal on a 10-year lease ranging from $750,000 to $800,000 per annum.

The latest property to hit the market for lease in the sought after CBD is already generating significant interest among the many tenants competing to secure flagship space.

Ms Harding is fielding a considerable amount of early interest at 33 Russell Street, a 384sqm corner site opposite Chanel and next door to Culture Kings. 

“This is one of the last opportunities to secure a flagship luxury landmark in the Paris end of the CBD,” Ms Harding said. “The international leasing campaign is expected to generate strong competition from global luxury retail. We are even receiving interest from Melbourne’s iconic hospitality groups due to the limited vacancy along Flinders Lane.”

She said as Collins Street was reaching capacity, Colliers International was working with landlords and tenants who had missed out on securing space at the sought after Paris end, including the likes of luxury retail groups Kering and LVMH and brands such as Yve Saint Laurent, Tom Ford, Valentino, Balmain, Suit Supply and Monki who are all seeking large flagship retail space. 

“This year we will see an influx of retailers become more creative with their sites, continuing to embrace the unqiue offerings that Melbourne has to offer,” she said.