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Competition from international stores lifts secondary rents in Melbourne CBD

Restaurant Pomodoro Sardo is paying $250,000 a year for 250 square metres at 111 Lonsdale Street, Melbourne. Photo: SuppliedMelbourne CBD landlords are benefiting from a flood of international retailers whose commitment to large stores has pushed up demand and prices for secondary locations.
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Prime retail rents in Melbourne’s CBD jumped by almost 10 per cent over the past 12 months, a rise mirrored by secondary rents which also rose sharply by 9.2 per cent, according to CBRE research.

The impact of international retailers was further heightened by low interest rates (driving consumer demand and turnover) and large-scale redevelopment of older city buildings which has invigorated retail locations, updating or adding new stock.

An impending redevelopment by Leighton Property on a site next to the Wesley Church in Lonsdale Street shows the impact.

The redevelopment has prompted long-established Italian eatery Pomodoro Sardo to relocate.

The Sardinian-themed restaurant took 250 square metres at 111 Lonsdale Street opposite its current location for a near-record $250,000 annual rent with no landlord incentive or works, in a deal negotiated by CBRE’s Zelman Ainsworth and Samantha Hunt.

“This pocket of Lonsdale Street has been activated by residential, retail and tourist growth,” Mr Ainsworth said.

The impact of luxury international retailers on premium spots in Collins Street is well documented, but the latest upmarket retailer to claim a place on the strip is Wittner Shoes.

The footwear retailer will relocate from its long-term home in Collins Place to a 90-square-metre shopfront at 30 Collins Street in a deal negotiated by Colliers International’s Ben Tremellen and Cam Taranto.

Mr Tremellen said there had been more than seven offers for the tightly contested space from a range of retailers.

The shoe retailer snared the shop on a five-year lease for rent about $180,000 a year, a rate of $2000 a square metre.

“We are seeing a significant push from premium fashion retailers in recent months. Retail vacancy levels in prime CBD strip locations are the lowest they have been in the past three years,” he said.

Wittner’s new premises will be directly opposite Giorgio Armani and Ermenegildo Zegna in a Monash University-owned building.

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