Hotspots in retail show up, but not for everyone
Retail rents could be set to rise soon, but not all owners in all cities will feel the full benefit.
That’s according to the latest research from Colliers International, which looks at the state of retail in Auckland and Wellington.
The report showed retail spending continued to rise across the country, with Auckland experiencing the largest increase of 1.2 per cent in the June 2019 quarter.
Retail spending in Wellington also rose. The region experienced consistent growth year-on-year since 2011 and is up by 2.6 per cent over the past year, according to Statistics New Zealand data.
The grocery, food and beverage sectors continue to experience the strongest spending growth.
Chris Dibble, director of research and communications at Colliers International, says retail sales performance is dictating the type and extent of retailer demand and influencing vacancy rates.
“While spending has been positive, the retail environment remains challenging for certain sectors and locations.”
In Auckland, strip retail and shopping centre vacancy rates rose to 6.5 per cent and 3.3 per cent respectively. However, in the CBD the vacancy rate is below 1 per cent.
Leroy Wolland, director of retail leasing at Colliers International says the delay of Commercial Bay has supported demand for Queen St.
“Commercial Bay is now 93 per cent leased, with many international brands opening their first flagship New Zealand stores. However, delays with construction have caused some to take short-term leasing options.
“We’re seeing a trend for pop-up stores in the CBD, such as the new Rodd & Gunn and Lululemon Athletica stores on Queen St.”
Along with Commercial Bay and the re-opened Westfield Newmarket, other major retail developments underway are pushing total forecast supply in Auckland to about
251,200sq m. “New development opportunities are bringing more options for tenants and a higher quality of premises,” says Wolland.
Despite large format retail rents likely to remain steady over the next year, the sector is positioned as one of the best performing retail asset classes for investors.
Dibble says that with such a large variation in average prime retail yield performance between all of the sub-sectors of retail, investors are focussed on
quality assets.