[+] The Resurrection of Chapel Street

The redevelopment of South Yarra’s Jam Factory, which as the name suggests produced pressed fruit condiments for nearly 100 years, is back before the City of Stonnington next week. Developers are looking for amendments to the approved five-tower project that will allow them to increase their yield at a time when modern office blocks are costing more to build, are worth less and tenant demand is waning. It’s not just the developers awaiting the council’s decision. Newmark Capital, which will deliver and own the commercial and retail side of the $500-million development, has an obvious interest. So too do the other two partners— investment managers Qualitas and developer Gurner Group—behind the 400 apartments and 164-key hotel. But perhaps more important are the restaurants, bars, cafes, gymnasiums, fashion shops and about 2200 other businesses that make up the Chapel Street Precinct—the heart of one of Melbourne’s most famous thoroughfares. All will be watching Monday’s meeting of the council. They see the Bates Smart-designed redevelopment of the Jam Factory and its hotel and residential components, 18,500sq m of retail and 20,000sq m of office space as the key to Chapel Street’s revival. ▲ Chapel Street runs in a straight line for more than 4km between St Kilda and the Yarra River. Image, main image: Filip Konikowski, FK Photography “This is one of those moments that will really redefine Chapel Street as an area,” says Josh Tebb, a senior director with JLL. “It will create a new central meeting space for the street, which it really needs … a go-to kind of hub for restaurants, bars [and] cafes.” Chapel Street runs north-south in a straight line for about 4.1km from Brighton Road in St Kilda to the Yarra River at Richmond. It dates back to 1849 and almost from its beginning has been a trading and shopping street. Fashion street’s lustre lost At one point it rivalled Melbourne’s CBD as a shopping destination and in the 1980s it found its name as home to boutique fashion stores. Household fashion names including Just Jeans began life in Chapel Street, as did Country Road and Kookai Australia. But the past three years have not been kind to Chapel Street, and empty shops and for-lease signs have lined the once premier fashion shopping strip. A global pandemic, the rise of online shopping, work-from-home and a downturn in the office market, construction on the Metro Tunnel and general economic headwinds have meant 50 to 60 vacant shops, according to the Chapel Street Precinct Association. That’s an improvement on 2020 when the number was closer to 100. ▲ A render of the development planned for the Jam Factory. The hope is the 165-year-old building can lead a revival of Chapel Street’s fortunes. Association president Matt Lanigan is another who will be watching the debate around the Jam Factory carefully. “They’ve been talking about redeveloping that site for 10 years,” he says. “It’s going to bring apartments, a hotel, new offices, new retail and new food and beverage. And it will bring in some marquee tenants that will give a massive boost to South Yarra and Chapel Street.” Office leading the revival Lanigan points to other developments—office developments—that have already breathed new life into the old street. The $400-million, 24-storey Goldfields House at 627 Chapel Street, for example, topped out in July, 2021. Great Southern Bank, the Brisbane-based group formerly known as Credit Union Australia, announced in March it would relocate its Melbourne CBD office to Goldfields House at South Yarra, taking a full floor of about 1125 square metres. Privately owned developers Oreana Property also took a floor, moving from St Kilda Road, joining digital and technology companies Fusion Markets, SICE and Tax Leopard, asset managers BFG, and co-working providers The Lofts. ▲ JLL’s Tim Carr (left) and Josh Tebb (right). Matt Lanigan (centre) is the president of the Chapel Street Precinct Association. JLL’s Josh Tebb brokered the deal that handed developers Marco Gattino and Lachlan Thompson’s Goldfields Group the development site at the end of 2017. “The Goldfields development has really refocused a lot of the commercial occupiers and it did really well to land CBD tenants and St Kilda Road tenants,” he says. “Chapel Street has obviously got an amazing retail experience, food and beverage, and two train stations including South Yarra, which I think is one of the busiest stations outside the CBD.” Tebbs says about 90 per cent of the development’s 24,000sq m of commercial space— built speculatively at the height of Covid—is now leased. Goldfields shows the way “The team has done well in a tricky environment. But they’ve shown everyone where you can get to in terms of rents, tenant profiles and that sort of thing.” And that’s good news for Lanigan and the association’s 1615 members, who in recent years watched sectors of the neighbourhood, such as the clothing vendors, move elsewhere. Selling T-shirts it seems, doesn’t always stack up alongside the growth of online retail and the price of a Chapel Street lease. “The food and beverage industry has bounced back in terms of restaurants and nightlife and late-night entertainment … they’re trading better than pre-Covid,” he says. ▲ The 24-storey Goldfields House at 627 Chapel Street topped out in July 2021. It is 90 per cent occupied. “And the cafe culture has suffered somewhat. Weekends are really busy, but Monday-to-Friday has dropped off because there are less people in offices.” What has surprised the association is the big growth in the wellness and fitness amenity along the street. Gymnasiums, yoga studios, wellness and recovery—Lanigan says association research has found a 300 per cent increase in the past 18 months. For its part, the Stonnington council understands the silver on its favourite street is in need of a good shine. Late last month a municipality-wide online poll closed on what the council called “a once-in-a-generation journey to transform Chapel Street into one of the great streets of the world”. Regaining a reputation Ratepayers were reminded Chapel Street was one of Melbourne’s most recognised destinations—famous for its abundance of vibrant and diverse retail, dining and entertainment offerings. “However, in recent years the vibrancy has slowly faded and it’s time to rethink and reimagine what the street could be now and into the future,” the council said. The poll asked about outdoor dining, markets, festivals, accessibility, security, local heritage, pedestrian space, parking, trams, traffic, street trees and gardens. ▲ Chapel Street in the 1950s. The street dates back to 1849 and has always been a trading and shopping thoroughfare. “We are at the beginning of the journey, with the first step to create an overarching vision for the street, from which we will deliver a masterplan—the blueprint to how we’ll transform Chapel Street,” the council said. Lanigan remains sceptical. He says local businesses are concerned the council wants to remove on-street parking along Chapel Street and focus on cyclists. “The general consensus from the majority of our members in the association is that if you remove on-street parking from Chapel Street, you’re basically going to destroy small business,” he says. Precinct funding pulled And he did watch the council pull funding—collected from rates and used for marketing—from each of Stonnington’s five precincts. He says Chapel Street Precinct’s share was $1.3 million each year. Undeterred, the association applied for and won a $450,000 grant from the Victorian government. The association will use that to deliver the Chapel Street Festival, scheduled for February next year—the first in 23 years. At least, they are planning a festival. The council, which shut down the festival in 2000 after rowdy behaviour, still has to agree to a permit. While the air of scepticism around the office sector continues to pervade the whole country, not just Victoria, real estate brokers remain bullish about Melbourne’s fringe generally and Chapel Street specifically. ▲ The Capitol Grand—a mixed-use residential development on the corner of Toorak Road and Chapel Street. Big players are continuing to invest and build, JLL executive for capital markets Tim Carr says. Private Melbourne developer Alfasi Property broke ground in August on its $100-million office project at 10 River Street, just a block from the corner of Chapel Street and Toorak Road. It is also a speculative build. “I think it’s traditionally been a retail precinct but now it is a truly becoming a mixed-use precinct,” Carr says. “We have a very optimistic view of Chapel Street itself as a commercial precinct, not just a retail area.” Like everyone, Carr and his colleagues at JLL will be watching Monday’s council meeting. But no more so than the developers. “The project will absolutely reinvigorate Chapel Street and put it back on the map as Melbourne’s most exciting retail and mixed-use precinct,” Gurner Group chief Tim Gurner told The Urban Developer . “We have had a great process working with the council and council officers over the past 12 months to ensure that we can deliver a world-class mixed-use precinct. “And we are excited to hopefully close this out next week.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] The Resurrection of Chapel Street

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