Gentrification is driving the revival of some of Melbourne's retail strips, while others continue to stagnate under the weight of high rents and a homogenous tenancy mix.
New research from agents Beller Commercial shows Smith Street, Collingwood and Swan Street, Richmond are on the up, but Bridge Road and Fitzroy Street, St Kilda remain in a slump.
While Carlisle Street, East St Kilda recorded a zero vacancy rate, the once healthy and glamorous High St, Malvern and Glenferrie Road, Armadale strips are suffering with more than 19 empty shops blowing out the vacancy rate to 8.6 per cent.
Beller Commercial director Fred Nucara said the newly revamped Malvern Central with its David Jones department store and undercover parking is sucking some of the shoppers from the strip.
Mr Nucara said regeneration of stagnant strips required some fundamental shifts – generational change of ownership; a change of use; and gentrification.
"For Bridge Road and some others, the owners were in the first wave of postwar migrants who will never sell and they don't have any debt," Mr Nucara said. "And Fitzroy Street has got no diversity. It has no identity."
The Bridge Road vacancy rate for the block between Punt Road and Church Street has blown out to 30.68 per cent and Fitzroy Street is running at 19.7 per cent.
However, regenerating suburbs that are in flux are attracting hundreds, if not thousands of new residents and new businesses keen to service them.
"The building of high-density developments around Chapel Street, Windsor and Smith Street, Collingwood gives a real confidence to new retailers. As projects finish, we get a flood of inquiries from businesses who want to move in or move into bigger premises," Mr Nucara said.
The tightly held Smith Street has traditionally yielded about two transactions a year but its ownership profile is starting to change. Last week, the renowned Jonathan's butcher's shop at 122 Smith Street went to auction. The Gianfreda family had owned the building since 1976 but Jonathan Gianfreda died in 2004.
CBRE agent Rorey James said "Eight bidders, including four from offshore, competed aggressively for the shop, with the first bid of $1.4 million meeting the vendor's reserve."
After 80 bids, the shop sold for $1.79 million on a yield of 3.6 per cent to a longtime customer of the business. The sale equated to nearly $16,000 a square metre. Although gentrification can reduce the diversity of shops and lead to too many cafes, bars and restaurants, Jonathan's isn't going anywhere soon. It has six years remaining on its lease and options to 2030.
"The big thing driving interest from locals and off-shore developers are the 2500 apartments going up within two kilometres. That gives people confidence that the street is not going to go backwards," Mr James said.
It was the third shop on Smith Street sold in the past 13 months. The Saint Crispin restaurant at 300 Smith Street fetched $2.45 million last July on a 3.2 per cent yield. In April, 2014, the Brooks shop at 424 Smith Street sold to a Hong Kong-based investor for $4.5 million.
