Retail property in strong demand
Major Auckland projects include prime CBD retail at Commercial Bay – artist’s impression.
Analysis from Bayleys Research paints a positive picture of strong demand, with a solid future outlook for high quality retail property across New Zealand’s major centres.
Beginning with the Queen City, this is how the sector is faring in the main centres:
Auckland’s strong regional economy and growing demand driven by ongoing high immigration underpin a solid outlook for the city’s retail property sector.
This is clearly reflected in the latest results of the Bayleys Research Auckland retail vacancy survey which shows overall vacancy at 5.1 per cent, holding at similar low levels to those of the past few years.
Strip retail and mall vacancies remain relatively steady at 6.3 per cent and 3.4 per cent respectively, with a slight increase in bulk retail vacancies to 7.4 per cent from 6.5 per cent a year earlier.
West Auckland was the only area to see vacancies rise — to 9.1 per cent from 7.4 per cent the previous year.
Bayleys Research manager Ian Little says much of this vacancy relates to new bulk retail stock built in the emerging Westgate retail precinct.
“We expect most of this new space to lease-up over the coming year, as new subdivision activity increases in the immediate catchment area.”
Strong population growth across the Auckland region is driving a wave of regional centre expansions. Around 100,000sq m of new regional retail space is currently underway or planned to commence this year with more planned for 2019.
Major projects include prime CBD retail at Commercial Bay; expansion at Sylvia Park; redevelopment and upgrades of Westfield centres in Newmarket, St Lukes and Albany; the second stage of Westgate’s NorthWest Shopping Centre, and town centre developments at Botany, Drury and Ormiston.
Wellington’s retail property fundamentals also remain solid, though the buoyancy seen over the past few years has eased somewhat. Despite a general plateauing in retail spending in the capital over 2017, albeit at elevated levels, consumer confidence remains strong.
Bayleys Research’s latest Wellington retail vacancy survey showed that vacancies generally remain tight across all the retail regions surveyed. Greater Wellington’s overall retail vacancy rate tightened by 150 basis points to 9.5 per cent from 11 per cent a year earlier.
Johnsonville, Lower Hutt and Porirua all recorded further falls while Paraparaumu, Petone and Upper Hutt saw vacancies rise marginally.
CBD Core vacancies also lifted to 7.1 per cent from 6.3 per cent a year earlier.
“Ongoing post-earthquake rebuilding and strengthening, as well as new builds, have seen a steady stream of new retail offerings coming onto the market, which is adding extra vibrancy and interest in Wellington’s CBD,” says Little.
Christchurch’s development of new retail amenities, along with expansions and upgrades to existing facilities, make it an exciting time for city retail.
“Revitalisation of the CBD retail scene has made great progress over the past couple of years,” says Little. “The opening of The Crossing with anchor tenant H&M in late 2017 added further impetus following the launch of retail elements within the ANZ and BNZ centres.”
Three major schemes fronting Cashel and Colombo streets will service a growing CBD workforce. The CBD’s resident population is also set to grow as the first homes in the East Frame are completed, further boosting retail demand.
“Retail development though is not limited to the CBD,” adds Little. “With changes in shopping habits and competition from the CBD rebuild, a number of mall owners have looked to upgrade and refurbish.”
In January, Kiwi Property began an $18.8m expansion and earthquake project at its Northlands Shopping Centre, adding a dining and entertainment precinct with tenancies expected to open in October.
A $10m refurbishment of Merivale Mall is nearing completion, which will see new retailers opening and the movement of a number of tenancies.