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Owners of city shops have weathered an influx of retail space added to the central business district market at the start of last year, with vacancy levels halving from almost 3% to 1.49% over 18 months.
But this drop in vacancies came at the expense of rents, with a CB Richard Ellis report showing CBD retail rents softened in the first quarter of the year and had remained static since.
Consumer spending has been affected by reduced consumer and business sentiment this year, as well as rising costs of living and fears Australia's unemployment rate could rise.
The MarketView report says retail rents in the Bourke Street Mall - the most expensive shopping strip in Victoria - fell 1.7% in the first half of the year to range between $5400 and $6150 a square metre.
Rents in Collins, Elizabeth and Swanston streets fell 3.48% over the same period to $2769 a square metre, the report said.
CBRE surveys more than 140,000 sqm of retail space in a defined retail core, and produces a vacancy rate for "high street" style shops with street frontage, shopping centres, laneways and arcades.
CBRE senior manager, retail services, Mark Wizel said the most notable falls in vacancies were in laneway Equitable Place and Port Phillip Arcade, now fully occupied after vacancies of 16.67% and 9.52% respectively at the start of the year.
Mr Wizel says fashion and department store retailing dominates the CBD tenancy mix, collectively holding 42.3%, or 60,790 sqm, of CBD core retail space. He said Swanston Street had recorded a 3.18% increase in clothing retailers since the start of the year.
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