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Rising investor demand fuels Melbourne’s retail market

Melbourne’s commercial property market has gained momentum over the last six months as investors increasingly target strata retail opportunities.

According to CBRE’s Melbourne City senior sales negotiator, Paul Tzamalis, strata retail in the city’s CBD has previously flown under the radar given investors’ preference for freehold properties.

“However, with limited opportunities in the freehold market in the sub-$5 million price range, investors are beginning to look at alternative options, notably strata shops,” he said.

“The growing affinity for strata retail properties is further being underpinned by a greater investor understanding of the sector, with offshore buyers particularly recognising the benefits of the growing high-rise population and the effect this will have on rental rates in the future fuelled by tenant demand.”

Mr Tzamalis noted that despite increasing interest in Melbourne’s strata retail market, there is a significant lack of stock currently available in the CBD.

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“Vendors are largely unaware of the worth of their stores. It was relatively affordable to buy a shop in the CBD close to five years ago, but since then it’s sufficient to say that prices could have improved by more than 50 per cent, in line with improved retail rents and demand within the CBD,” he said.

Rising investor demand fuels Melbourne’s retail market
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