Pop-ups hit the spot as retail vacancies rise

Melbourne has been experiencing a rise in the number of pop-up stores opening in the central business district, eclipsing overall retail vacancies during the second half of 2012, new research from Knight Frank Real Estate has revealed.

Vacancies in the Melbourne CBD increased from 2.4% to 2.5%, due to increases in street frontage and arcade vacancies of 1% and 0.6% respectively. Vacancies in city shopping centres, however, greatly decreased, from 3.1% to 1.6%.

Gary Loo, director of leasing at Knight Frank, told SmartCompany the figure can be attributed to the rise of pop-up stores – short-term, temporary leases of retail space.

“Pop-ups can only be done when centres require a short-term arrangement,” Loo says.

Pop-up stores have become increasingly popular over the past few years due to rising rents and retail costs, with several businesses in the fashion and food industries setting up these types of locations.

The Knight Frank survey shows many retailers in shopping centres, including QV, GPO and Centrepoint, made the most of short-term availabilities to set up temporary locations to sell their wares in the lead up to Christmas.

“It’s a positive for centres, because there’s a gap to be filled, and it’s good for tenants [due to extra business]. So it’s a good thing,” he says, noting both tenant and landlord are often pleased by the arrangements.

Scott Williams, pop-up store expert and director of Melbourne company Instant Retail, also said pop-up stores can disappear as quickly as they appear.

“It’s often a sales event or a product launch,” says Williams. “It arrives suddenly and leaves suddenly.”

“The most popular genre of pop-up stores is fashion retail. But you get things like giftware and books as well.”

Williams says the main benefit for retailers is having an opportunity to showcase products without the commitment of a long-term lease.

“They can also test the waters in a certain area,” says Williams, “to see if that’s their demographic.”

Williams says his company saw a flurry of activity leading up to Christmas.

As for whether this pop-up store trend will continue, leasing director Loo thinks that it will for a time, but the next year could see a return of more permanent tenants settling into CBD shopping centres.

“For the foreseeable future, yes, meaning a window for about 12 months,” says Loo.

“In 12 months’ time, the economy will start to pick up, which means there’ll be more take-up from permanent tenants,” predicts Loo. “You can’t kick out a long-term tenant to put in a pop-up store.”

Loo thinks the pop-up craze, although it is a good retail gap-filler, is a sign of the tough retail environment at the present time.

Williams takes a different view, believing the trend is here to stay.

“I think it will continue. It’s a whole new opportunity of retail theme, as long as there are vacancies, and vacancies continue to increase, there’ll always be opportunities for this kind of retail.

“Overseas it’s more permanent, it’s becoming a lot more popular. In the US and UK, the vacancy rates are a lot more serious, so it is a big trend there.

“If it’s done correctly it can be a win-win for both the retailer and entrepreneur. And it keeps the space alive.”