Retail space in Melbourne’s central CBD becoming as rare as hens’ teeth

The inaugural edition of the monthly newsletter for Knight Frank’s Melbourne retail team, Melbourne Retail Leasing Insider, found figures from the City of Melbourne showed the retail unit vacancy rate in central Melbourne had dropped one percentage point to 5.5% in H1 2025, with the broader CBD down sharply to 7.8%.

During 2021, the central CBD retail vacancy rate was as high as 27.9%.

Knight Frank’s Head of Research and Consulting Dr Tony McGough said the reason why retail vacancy rates were dwindling in the Melbourne CBD, and central CBD in particular, was due to a range of factors, including tourism.

“The return-to-work story in Melbourne has improved markedly but remains somewhat weaker than other cities, particularly on Mondays and Fridays,” he said.

“But Melbourne has other strings to its bow. According to STR, Melbourne sold a record 870,755 hotel room nights in June, 1.6 per cent higher than last year - which was already a record.”

“This coincided with the RISING festival getting underway and attractions pouring into the city, with exhibitions from Lego’s Star Wars to French Impressionists.”

Knight Frank’s Melbourne Retail Leasing Insider found there was more to come, with the retail market expected to continue to improve.

In July the British Lions, which played two matches in Melbourne, outdid Taylor Swift and brought about a 140% increase in sports apparel sales, a 94% increase in pub sales and another 6% increase in accommodation sales, according to NAB.

In August Mecca opened to an estimated 20,000 customers on day one and is expected to attract 50,000 per week going forward.

“Melbourne continues to be the magnet to major national and international attractions, and brands are pivoting to take advantage of this,” said Knight Frank Director Retail Leasing in Victoria Michael Di Carlo.

“This means prospective retail tenants come from both international names and, of course, local businesses, with Melbourne’s famous food and coffee culture specialists always eager to find space in the city.

“As price pressures ease and interest rates continue to fall back to a neutral setting - both here and abroad - expect the cultured, fun city to go from strength to strength and the leasing environment to consequently get even tighter.”

Knight Frank’s Melbourne Retail Leasing Insider will be delivered to subscribed recipients each month by Knight Frank’s recently expanded retail team in Melbourne, now consisting of Mr Di Carlo, as well as Partner, Leasing Gary Loo and Retail Leasing and Projects Coordinator Marie Formica.

As the inside source for everything retail in Melbourne, the newsletter will provide updates on the retail market for landlords, tenants, investors and anyone who just loves the city’s vibrant retail scene.

It will include everything from exclusive leasing opportunities to major deal announcements and expert insights, as well as fresh intel on market trends, local and international tenant movements and a first look at some of the most exciting retail spaces hitting the market.

You can read Knight Frank’s monthly Melbourne Retail Leasing Insider newsletter here.

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