Melbourne’s retail offering is among the best in the world, but it’s struggling to meet the demands of the city’s rocketing population.
Melbourne’s population has grown more than 2.5 percent annually since 2011 compared to 1.8 percent in Sydney. The city is set to reach 6 million people by 2025, overtaking Sydney as Australia’s largest city.
But retail development has failed to keep pace. New research from JLL shows that there will be just over half a square metre of retail floor space for every Melbourne resident in the next three years compared to the national average of 1.9 square metres.
The disparity is providing retail investors with an exceptional opportunity says Stuart Taylor, Senior Director of Retail Investments in Victoria for JLL.
“More than anything, Melbourne presents a compelling case for retail development with fewer assets competing for a larger pool of retail spending.”
The supply shortfall has been a result of the competition for land with residential development which is also trying to keep pace with population growth, says Taylor.
“The difficulty in securing metropolitan sites for retail is an ongoing challenge, with few remaining sites large enough to meet requirements of major retailers and continued competition from alternative residential and commercial development” he says.
Melbourne is a renowned shopper’s haven, with the strongest retail turnover growth in all of Australia at 5.2 percent compared to 2.9 percent nationally.
“The fundamentals of population growth and spending provide retail investors with an exceptional position for rental growth and income security in the medium to long term and is the key driver for Melbourne’s growth in the sector,” says Taylor.
Retail developments currently underway in Melbourne include the final stage of Vicinity Centre’s The Glen re-development and the retail component of Fraser’s Burwood Brickworks. In total there are 12 projects under construction that will bring 132,400 square metres to the market.
Meanwhile, retail transactions in Melbourne continue to show some of the strongest results in the country.
In November last year, Blackstone sold to Waverley Gardens Shopping Centre to Elanor Investors Group for A$178 million.
The shopping centre occupies a substantial 106,000 square metre site in metropolitan Melbourne allowing for future mixed use development potential.
In December ISPT Core Fund sold Campbellfield Plaza to Charter Hall for A$74 million. The site also offers long term redevelopment potential.
Click to read more about what’s in store for Australia’s property markets in 2019.