Dion Lee shop and Armadale hair salon to test high-street retail

The shops will be auctioned in late August, with the listing agents confident that cashed-up investors won’t be put off by economic headwinds.

“In this sub-$5 million asset class, most buyers aren’t heavily sensitive to interest rates because they are cash buyers looking for an alternative to leaving their money in the bank,” said Stonebridge partner Rorey James.

Wealthy families from the neighbouring suburbs of Malvern and Toorak are likely to be among the buyer pool. It wouldn’t be a surprise if customers who visit the stores or nearby cafes were contesting the auction, James added.

Stonebridge is auctioning a string of assets as part of a deceased estate, with the properties having been held by the same family for half a century.

The estate has already offloaded a row of five shops on Glenferrie Road in Malvern, with a local investor forking out $7.75 million last year on a sharp passing yield of 2.64 per cent.

Surrounded by popular upmarket brands including Aesop, Zimmerman and Scanlan Theodore, the 180-square-metre High Street property is leased to Dion Lee on a five-year term with no further options from 2026. 

James said the lease terms would pique the interest of owner-occupiers as well as mum-and-dad investors and self-managed super funds.

“There’s a lot of high-profile luxury retailers who would love to occupy that asset,” he said.

Currently, Dion Lee provides an annual income of $98,500, but James estimated the market rent could be around $140,000 based on a recent leasing enquiry for the asset from another national tenant.

First established in Sydney, Dion Lee has grown into an international success story, boasting eight shops in Australia.

Meanwhile, the Beatty Street property is tenanted on a five-year lease with 5 per cent annual rental increases.

In the current economic climate, buyers were becoming more risk averse, James said, noting a “flight to quality” in the retail sector. 

“The main trend is buyers are more selective at the moment,” he said. “They are gravitating toward good-quality assets.

“These two assets are definitely in the A-grade category – particularly the High Street property – so I think they will hold up well in this market.”

The properties are scheduled to go to auction on August 18. James said the asset type and price point suited an auction.

“The beauty of an auction is it’s transparent,” he said. “If it was a private sale or an expressions-of-interest campaign, it wouldn’t resonate as well with investors at this price point.”

Leasing agent Zelman Ainsworth of Ainsworth Properties said High Street was one of Australia’s most tightly held retail strips in demand from local and international fashion brands.

“Its success has been driven in particular by the affluent neighbouring suburbs, with a huge amount of wealth coming to the retail strip for their shopping needs.”