Three luxury retailers are vying for the Athenaeum Club's boutique space at the Paris end of Collins Street .
Valentino, Fendi and Yves Saint Laurent are understood to be shortlisted for the 400 square metre space at 83-85 Collins Street which is owned by the men's only club.
The 150-year-old club is nestled among a hive of luxury brands, including Hermes, Prada, Longchamp, Louboutin and Cartier. Collins Street has been Melbourne's premier shopping strip since the early days of settlement.
Agents CBRE have been working on the deal since last year when the space was put to the market in an international expressions of interest campaign effectively booting existing tenants Rolex and Ashley Opal Jewellers.
However, it is understood the deal, struck at around $4700 a square metre, will hinge on possible changes to the heritage-listed facades.
Retail analyst Martin Ginnane from Ginnane said international retailers are attracted to Melbourne's heritage architecture, which bucks the trend towards homogenised mall aesthetics, but the spaces are often not big enough.
"There's a lot of pent up demand for space. Some retailers wait years for space on Collins Street but it's hard to pull sites together because the footplates are small," Mr Ginnane said.
Balenciaga is also understood to be looking for space in Melbourne but is pressing for a two-level boutique. English trench coat manufacturer Burberry opted for a large two-level shop at 257 Collins Street in the valley between Swanston and Elizabeth streets. It is in the path of the steady stream of foot traffic heading for the Bourke Street mall but out of the Paris-end luxury precinct.
International retailers are driving rental increases and low retail vacancies in the CBD.
Recent research from Savills Australia shows the vacancy rate for Melbourne's CBD retail is still well below the five-year average of 5.2 per cent.
It rose slightly – by 0.7 per cent – to 3.3 per cent in 2016 as the number of shops increased to 1181 from 1132.
The report found the increased number of shops was attributed to the opening of the St Collins Lane four-level arcade which opened in May without significant amount of vacancy. Several shops remain empty in the centre which was sold in July to JP Morgan Asset Management for $250 million.
The survey shows there were just 39 empty shops among the 1181 retail spaces in the city. Clothing, footwear and accessories dominated the city at 492 shops, with cafes, restaurants and takeaway food occupying a further 281 spaces.
Savills associate director of research Monica Mondkar said the residential and office worker populations helped Melbourne's CBD weather flagging spending in other cities.
"Melbourne's CBD has undoubtedly been a good performer in recent times with the vacancy rates characteristic of periods with stronger economic growth and certainty.
"When you consider that the dominant CBD retail sectors are hospitality, food, and service sector related, it's clear that population growth factors have been the key driver of CBD retail," Ms Mondkar said.
The profusion of high profile global fashion brands was also attractive to tourists and Melbourne's suburban population, she said.
"The number of new and refurbished retail precincts and the continuation of the influx of high-profile global brands has no doubt accounted for a significant part of the increase in spending, attracting thousands of new shoppers to the CBD," she said.
The CBD's residential population is expected to grow by 14 per cent by 2020 which should keep the vacancy rate low, she said.
