Melbourne set for hospitality venue boom as operators sign long leases ahead of Metro Tunnel completion
Melbourne’s CBD is expected to have a surge of news bars and eateries as new leases have been signed in anticipation of better times ahead for hospitality.
A surge in new Melbourne hospitality leases is eating up the city’s supply of empty shop fronts amid rising expectations of a CBD recovery.
New analysis by commercial leasing agency Fitzroys shows the vacancy rate for retail venues in the city centre has fallen from 8 per cent to 6.1 per cent in the past year.
In 2023, the figure was 14.1 per cent.
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The city’s most in demand spot is now Swanston St, which had languished with a vacancy rate as high as 18.7 per cent in recent years as a result of Metro Tunnel works.
A surge in demand from operators wanting to be close to soon-to-be-opened new train stations has driven it down to just 2.6 per cent – surpassing the Paris End of Collins St as home to the city’s most competitive retail leasing space.
Fitzroy’s director James Lockwood said a Swanston St block between Collins St and Bourke St had gone from having half its shopfronts empty to now being impossible to get into.
And it’s hospitality operators filling the spaces, with the research showing they now account for 47.4 per cent of new retail tenants in the CBD – up from 34.1 per cent at the start of 2023.
Ground Floor, 124 Exhibition St, Melbourne, was formerly a Nine West store.
It is set to become a new Japanese cafe.
However, Mr Lockwood said food operators were still struggling with generally smaller budgets from consumers, and in many cases were responding to expectations that interest rate cuts would boost dining spending and a predicted rise in office workers returning to the city.
“Most are trying to sign for five to 10 years with a view they will be doing better later on,” he said.
“One sushi chain has leased three in the city in the past year, thinking there were more people coming back and the tide will turn so they were getting in early as rents are still quite low.”
Mr Lockwood said a big part of the demand for more eateries was a result of the city’s reputation as Australia’s events capital, with major sporting stadium precincts on two sides of the CBD as well as prominent event spaces at Federation Square, the National Gallery of Victoria and the city’s range of theatres.
Basement, 114 Russell St, Melbourne, was formerly the Izakaya Den.
Another Japanese venue will soon replace it after recently signing a lease.
It’s also seen as a response to City of Melbourne data showing foot traffic in the city is up 35 per cent after 6pm in the past 12 months.
Late night social media posts from diners at the city’s rooftop bars have also led to more venues opening later and closing later, he said.
However, insights from Fitzroy’s Walk the CBD report suggest that there has been a drop off in service retail, such as hairdressers and nail salons, and specialty retail, including brand name stores — though many of these were now seeking space within the CBD’s shopping plazas such as Emporium.
Mr Lockwood noted there had been expansions by the likes of Shuji Sushi, which took on three new addresses in the CBD in the past year, as well as Chilango’s Mexican Cantina and Crackle Brae, a Banh mi venue, taking up space in Madame Brussels lane.
Ground Floor, 136 Exhibition St, Melbourne, had been an Officeworks shopfront.
The spacious address will become a new restaurant by Michael Lambie, called Juni.
Additional venues along Swanston St include a new Hungry Jack’s burger join, a Japanese steakhouse named Yappari Steak, as well as bubble tea, chocolatier and waffle shops.
The Fitzroy’s data suggests there has also been a rise in restaurants as a share of the Chinatown precinct’s business.
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