Vertical Retail Driving Hike in Flinders Lane Rents

Gross rents top $700sq m in east end

Vertical retail has caused a huge spike in demand for space in Melbourne’s iconic Flinders Lane, driving rents to traditional showroom/retail rent levels as vacancy reaches new lows.

According to Savills Director Phillip Cullity, gross rents in the laneway, which has become one of the most sought after CBD laneway precincts in Australia, are now at an historic high of $700 a square metre.

The latest deals negotiated by Mr Cullity for up to $700 a square metre gross include:

• Bluebell Bridal – 205 square metres, Level 1, 141 Flinders Lane
• Warren and Mahoney Architects - 213 square metres, Level 4, 141 Flinders Lane
• Akesa Pharma – 160 square metres, top floor, 141 Flinders Lane
• Maxcon Constructions – 500 square metres, upper ground floor, 71 Flinders Lane

Mr Cullity said Flinders Lane’s transformation from warehouse space for the rag trade to office conversions, was now in a new retail phase which had further intensified competition for any available vacancy.

“With the laneway now in a third phase of transition where typical office space is now being taken up for vertical retail, vacancies are becoming increasingly scarce and that means we are going to see continued rental growth for years to come,” Mr Cullity said.

He said one prominent example of office space changing to retail was Chanel which had taken space on the corner of Flinders lane and Russell Street, while others which had together changed the nature of the `Paris End’ of the street included Bang and Olufsen, Stylecraft, Bluebell Bridal and Zambesi. The influx has also included several restaurants and bars such as Cumulous, Supernormal and Garden State.

“The change has been dramatic. Extensive refurbishments to old warehouse buildings featuring high ceilings and wonderful light, and the introduction of modern building services and facilities has pricked demand.

“There is still a place for the galleries et al, which give the precinct great character, but there is no doubt the Lane is seeing significant change and that’s also being reflected in rents,” Mr Cullity said.

He said 10 years ago rents were circa $300 to $350 a square metre gross but were now achieving up to double that rate and the type of businesses that were now attracted to the precinct had changed accordingly.

“Image conscious, boutique firms - particularly those with a young staff and client base - are increasingly chasing bespoke office space that is sympathetic to the company’s individual style and philosophy and they are often prepared to pay a headline rent for the right space in the right building,” Mr Cullity said.

Having ridden the Lane’s transition over the last 15 years, Mr Cullity sees no end to the future development of the precinct as one of the most valued boutique CBD addresses in Australia.

“The Lane and its heritage listed buildings, its cafes and bars, fashion houses and galleries, its atmosphere, location and the smaller arty laneways, like ACDC Lane and Hosier Lane, have attracted a range of boutique firms across several industries and that’s not about to change anytime soon.

“If anything, the attraction has intensified in recent times. You can’t recreate a timeless precinct like this and tenants realize that and that is reflected in increasing demand and rental growth.”

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