Leading retailers are vying intensely for corner shop space in downtown Melbourne and pushing rental prices on Russell Street to record highs.
The exorbitant rent that a leading convenience store operator is willing to pay for a corner space in downtown Melbourne exemplifies the intense competition amongst retailers for prime sites in the CBD.
Shopping franchise City Convenience has agreed to rent a 93 square metre corner shop site situated just a block away from the thriving Bourke Street Mall at a rate of $3867 per square metre, or $360,000 a year, under the terms of new seven-year lease.
The new City Convenience store will replace Italian restaurant Café Tono at 179 Bourke Street on the corner of Russell Street at the ground floor of a six-storey concrete building complex.
According to CBRE, which was responsible for brokering the new City Convenience lease agreement, the deal marks record for rental levels on Russell Street.
City Convenience hopes that the prime location will help it head off competition from encroaching rivals in the convenience store market, including Maher Magableh’s EzyMart and international retail chain giant 7-Eleven.
City Convenience is not alone in its willingness to pay an exorbitant price for corner space in downtown Melbourne.
Most of retail outlets obtained by EzyMart in the Melbourne CBD over the past year are situated on corner spots that command similar premiums to the Bourke and Russell St. City Convenience store.
EzyMart pays $3630 per square metre to rent the 50 square metre space at 219 Elizabeth St. on the corner of Little Bourke under a 10-year lease agreement reached last year.
Telstra reportedly pays approximately $10,000 per square metre for its outlet on the corner of Bourke and Swanston St., while upmarket fashion labels are also grabbing corner spots in the city, including Chanel, Hermes and Gucci.
The premium for these coveted locations can run as high as 40 per cent, because of the dual shops fronts they provide to intersecting streams of pedestrian traffic, as well as their comparative scarcity.
Rents are expected to continue rising on Russell Street in the wake of City Convenience’s record-breaking lease, as fashion brands spill over from nearby Collins Street and Asian retailers spread from the Chinatown end.
Chanel and Gucci both already have shops on Russell Street, with Chanel grabbing the site at the corner of Russell Street and Flinders Lane in October 2013, and Gucci opening an outlet at 20 Russell Street in July for net rent of around $1200 per square metre.