Global brands flock to Melbourne
Publish Date: August 19, 2014
Melbournians are affluent enough to do a lot of traveling, and they also have extensive exposure to global brands by means of the Internet. So when international mass-market retailers began to arrive in the Australian city sometime about mid-2010, many of them found the market to be ripe. Gap, H&M, Hollister, Muji, Topshop, Uniqlo and Zara are among the international arrivals that have driven up demand for high-quality retail space. In many cases they could be accommodated only when developers expanded their existing shopping centers or built new ones. Emblematic of the expansion rush are two large suburban malls: Highpoint Shopping Centre, which recently underwent significant expansion, and Chadstone Shopping Centre, which is soon to follow suit. The Highpoint redevelopment opened in March of last year, having added some 30,000 square meters (about 323,000 square feet) for a new total of 145,600 square meters, making Highpoint the third-largest shopping center in Australia. Among its new tenants are Samsung, Topshop and Zara. Meanwhile, Chadstone announced a roughly A$580 million (about $545 million) expansion of its own that will house about five new international flagships.
In Melbourne’s downtown, rising rents and shining new projects reflect a vibrant urban retail sector — one so vibrant that in the race to stay ahead there is significant “competitive tension for deals among landlords,” according to Leighton Hunziker, divisional director for retail services at Savills Australia. Hunziker has brokered deals for a number of global retailers arriving in Australia.
The newest major shopping center downtown is Emporium Melbourne, a 47,000-square-meter project that opened this year on Lonsdale Street. Emporium Melbourne boasts Australia’s first Uniqlo store, a 3,000-square-meter flagship that reportedly has been enjoying a stellar first few months. The shopping center also has Australia’s first Muji, with a more modest 360 square meters of floor space.
Brasher in scale is H&M’s first Australia store, a 5,000-square-meter behemoth that opened in April around the corner from Emporium, in the GPO, another central-business-district shopping center. The GPO occupies the postal building that was converted to a shopping center 10 years ago but never hit the right note with shoppers until H&M arrived.
All the new global retail is having an ambiguous impact on rents. It is still a too early to say anything definitive about the broad-based effects, but not every home-grown fashion player is willing to pay some of the highest rents being asked for what little space is vacant — occupancy is not far off 100 percent — in the Melbourne CBD and suburban shopping centers. Domestic retailers know that the international players will drive traffic, but they also wonder whether that will be exclusively to the internationals themselves. They have reason to be circumspect. A specialty store space in a Melbourne shopping center will cost roughly A$750 to $A1,500 per square meter, net of expense recoveries, while a store on the Bourke Street pedestrian mall at the center of town will set tenants back about A$6,500 to A$10,000 per square meter, according to Savills Research. Within the CBD but off of Bourke Street, the cost does ease up a bit, though not by much.
With all the new arrivals and shopping center development, Melbourne’s aggressive self-promotion as Australia’s fashion capital — a moniker for which it perennially wrestles against its northern rival, Sydney — appears to be increasingly justified. Melbourne was first to get a Topshop, an H&M and a Uniqlo, leaving Sydney scrambling to catch up.
Melbourne will be hard to reel in, and not just because it guards its reputation so jealously. It contains a variety of high-quality shopping centers where occupancy is tight and rents are lofty by some standards. Most global retailers, if not all of them, are discovering, however, that sales volumes easily help pay those rents.