Fitzroy Street: Gentrification, traffic and high rent

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By Ryan Reynolds

When I moved to Melbourne, someone suggested that it had lost some of its local charm – in particular, Fitzroy Street. My first reaction was, “That street? What’s the big deal about that?” I still think my initial reaction was right. It’s not just an attraction that ranks, for lots of reasons. I’ll explain a few of those and that might explain how we got to where we are, and where this will likely turn out.

Firstly, it’s difficult to get there and the traffic is terrible. If you live within walking distance then that helps, but not many do. Traffic helps out small streets to advertise and trade in the beginning (there’s a reason that all of our now favourite streets are known as high streets), but after a point it becomes damaging. I’d argue that Fitzroy Street has crossed that point and those traffic management strategies are doing a lot of collateral damage to the shops nearby. Parking is complicated, there’s a lot of through traffic, and the road blockages ward people away.

The point of those traffic strategies is to get people out of their cars, and to either walk or take the tram. But at the moment there are too few people able to get to the street to satisfy the rental spaces, and much of that traffic is also through traffic commuting in the mornings and evenings.

Now if you relax those traffic management strategies, the through traffic will get worse. If you make them harder, then fewer people can get there. What would be better is for the urban density to increase to provide more destinations within a bike ride or tram range to not need the car – but that’s going to take some time.

The second issue here is what architects refer to as ‘activation’. Only the south side of Fitzroy Street is really activated (that is, it has things which people interact with at the street level), and there’s virtually zero activation on the Esplanade between the Yacht Club and Luna Park.

Activation is really important; it makes places feel inviting, it makes them feel safer, and encourages you to stay longer and spend money. Blank walls, dark corners, and long stretches of pavement with shadows kill activation dead in its tracks. Ideally, you’d want good activation on both sides of the street and in the side roads, and be able to make a nice transition between Acland and Fitzroy Street. But right now that walk seems like a walk in the wilderness especially at night.

Other successful high streets have dense populations right on top of the street on both sides, and with more people easily able to get there at peak periods (like Bay Street or Chapel Street). This contributes firstly to activation, especially in the evenings, and secondly to increase the number of consumers who will buy food and drink nearby. Fitzroy Street misses out on those local consumers from the density, and the inflow from other neighbourhoods thanks to the traffic management.

So if it’s so uninviting, why is the rent so damn high? Firstly, even if the rent was the same, the capacity to pay it has gone south. The past decade hasn’t been kind to retailers: sales haven’t been growing as fast as they used to, wages have gone up, internet shopping has become much easier, and people really like shopping in the city (and you can park in the city on weekends). Worse, in the last decade the retail offering in the city has greatly improved, and the city can capitalise on a much larger catchment to offer a broader range of shops than St Kilda ever could.

If you’re buying all your books online, buying your clothes and partying in the city on weekends, then it’s a no brainer why things might not be doing so well in a regional strip. Now, in general, landlords aren’t interested in keeping their properties vacant: they may be selfish but they’re not stupid. If it really is a rental cost issue then the price of those rents should come down, or the incentives offered by landlords should go up. It may be that simply for businesses looking to open their doors there are better places to go.

But for housing, it’s a different story. In the last decade a lot of new people have decided to make Melbourne their home, and while some might like to live in the city, many more will prefer somewhere with a bit more space. All those people have voted with their feet and their wallets, and rents and house prices have gone up.

In the end, the value of the land underneath that strip may be more valuable as something other than a niche bookstore and that alternative use will get reflected in the rent. In the long-term, these people are going to keep arriving in Melbourne and St Kilda should be able to get its slice of those newcomers by providing new homes for them in new apartments, in and around Barkly, Acland and Fitzroy Street. But if there aren’t more places to live in the area there will be even more buyers and the same supply, and those rents will get even worse.

And this steady attraction of Fitzroy Street as an incumbent retail and entertainment precinct should continue to be successful once the area can accommodate more people or make it easier for people to get there when they want to. St Kilda is a short distance from a major employment generator, with good transport connections, and the inflow of people into Melbourne is high. The long-term prospects are positive, even though right now that may be hard to believe.

Ryan Reynolds is an economist and infrastructure analyst, with previous experience providing cost benefit analyses for major private, and public infrastructure projects.

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