In Melbourne, and especially now during the harder stage four lockdown, some of the shopping strip landscapes look so de-peopled and are lined with so many dark shops sporting “for lease” signs that the scene could surely be from a post-apocalyptic movie.
In some of the one-time buzzy, heritage-attractive and village-friendly Victoriana precincts of the inner suburbs, vacancies last month climbed so high that in some streets records have been set.
Around 22 per cent of shops in Bridge Road, Richmond, and 21 per cent of the red-brick stores in Chapel Street are now empty, and not just temporarily closed for the duration of the second lockdown.
Carlton, for 50 years with Lygon Street as its famous destination eat street, has been so bereft of local and international university students that since early autumn it’s been more like bleak street.
The same situation is repeated in suburban shopping precincts near and far, and the commonality of this new status quo begs the question of when landlords will reach the limits of their ability to hold onto non-paying retail investments, and when “for lease” signs will turn into “for sale” signs?
Practised as we now are in looking for the silver linings of 2020, vintage shop-tops that were anyway initially constructed as combined retail and residential may well represent multiple non-retail conversion opportunities.
A young Melbourne architect, who has just refurbished the upstairs component of a narrow brick shop in one of Melbourne’s earliest shopping streets, has long been preoccupied by how much first-floor accommodation above this style of property “has been so underutilised” that he says turning more back to residential “would be a great direction”.
Jack Chen, principal of Tsai Design, says “instead of ignoring this prime real estate so that it becomes dilapidated, which is such a shame, I hope we can get it going again”.
Agent Rorey James, of CBRE Commercial Property Melbourne, sees even more scope for more conversion variations that could revive these apparently declining places that he’s convinced could rebound quite strongly “post all this”, or after the COVID-19 pandemic.
James believes that one hangover from the virus fears could be “a reluctance of customers to go back to shopping malls”. Instead, he says, “people will go back to local strips”.
“And with more people working from home than they have before, they will spend more time in their local shops,” James says.
Shop-to-residential conversion is no new thing but the agent agrees “there may well be a need for more residential developments in these areas. Groups of shop owners may come together in joint ventures to sell [development-scale sites].”
He cites one high street owner collective which subdivided and sold off the unused rear portions of their neighbouring retail properties to a developer.
“There are a whole lot of ways these properties could go in the next couple of years: shared housing use, student housing, medical and service provider premises – especially with these strip shops being in such great locations.”
What he calls shop-tops, or the reversion to more shopkeepers living above the retail premises, “is very popular in Asian markets. And with worker decentralisation from the CBD, more of these properties could also become small group offices, satellite hubs.”
With even corporate leaders acknowledging the dawning age of “dispersed workplaces”, where employees work mostly from home or, at minimum, two days a week, the shop-residential typology offers great scope for the big street-front room to become the ideal home office.
“Everything is on the table,” James says. And he says “the feeling in some of these retail strips is that COVID-19 could be a blessing in disguise with consumers changing the way they live”.
The couple who asked Chen to improve the living quarters above their Smith Street, Collingwood, shop where they retail and repair classical stringed instruments, had endured 15 years of a rudimentary on-site arrangement that had them going downstairs and through the workshop to use the bathroom.
Upstairs, only half a wall divided their kitchen from their bedroom. In a structurally sound building, “it wasn’t hard to improve”.
With builder Sustainable Homes Melbourne, Chen, already a brilliant small-space adaptor, made a lot of clever things happen in a property with a 4.5-metre width but the common Victorian style advantage of having 3.3-metre ceiling heights.
One of the most critical changes was putting a translucent roof over the central stairwell “that brings so much light down through a plastic membrane that it can feel like you’re outdoors”.
“It’s a dynamic space,” Chen says. And indeed, the light is so good that plants are thriving within the atrium-like space.
With cabinetry “and all the fixtures wrapped around the walls to make it open plan”, a stylishly simple and green-toned kitchen was made in the front upstairs room, which creates a noise buffer between the contiguous living room and the street.
Chen said the other main moves were making a terrific roof deck above the new rear second elevation, and a small, screened deck off the main bedroom that gives seclusion for the residents and partially blocks the outlook to a raffish back lane.
The Atop a Shop project shows one aspect of what might be done with the vacated shop stock that could quite possibly start hitting the post-COVID-19 commercial realty market.
“It took effort to make it look this simple,” Chen says. “But I’d love to see other projects like this”.
Keep up with Commercial Real Estate news.