Retail vacancy up but still low
TColin Taylor
he overall retail vacancy rate in Auckland has increased to 2.6 per cent — up from 2.3 per cent a year earlier, according to the latest Colliers Essentials research report.
Wellington’s overall retail vacancy rate has dropped to 6.9 per cent, down 1.9 percentage points from a year earlier, says the report, which provides a snapshot of the retail markets in the two North Island main centres.
Demand for space remains tight in both cities but rents are static as retailers wait for “the right spaces” to become available amid concerns about the entry of Amazon into the Australasian market.
Leo Lee, research manager at Colliers International, says Auckland’s growing population and strong tourist numbers continue to bolster foot traffic and demand for goods and services.
He says the CBD strip retail vacancy rate has dropped to 3.5 per cent, while the shopping centre vacancy rate has increased to 2.3 per cent. “The demise of some wellknown retailers last year highlights the competitive nature of the retail market, and the growing threat of e-commerce.
“Landlords are expected to temper their expectation of rent rises, especially in areas with less exposure to foot traffic. Talk of how to ‘Amazon-proof’ retail destinations will see food and beverage being the centre of new retail developments.”
Net rents in the Auckland CBD are running at $2775 per sq m and at $1250 per sq m in regional centres; while CBD yields are at 5.3 per cent and regional centres are 6.6 per cent.
The latest report shows that 149,877sq m of retail space is under construction in Auckland with another 96,625sq m proposed through to 2023.
In Wellington, the prime retail strip of Lambton Quay remains tight — recording the only increase in vacancy out of the seven precincts surveyed — but vacancy is still low at 4.6 per cent.
Gross rents in the Wellington CBD are put at $1309 per sq m and in regional centres at $1705 per sq m; while yields are 6.8 per cent in the CBD compared to 7.6 per cent in regional centres. About 7500sq m of retail space is under construction and 42,932sq m is proposed for up to 2023.
Among the newest shops in Wellington is cosmetics retailer Mecca, which has taken up 484sq m of ground floor retail left behind by Topshop at 256 Lambton Quay.
“Non-core locations enjoyed modest rental growth, as refurbishments reduced the total stock available in some precincts,” says Lee.
He says a lack of opportunities to buy has kept investment activity in Wellington low. Retail property sales reached $81.1 million in 2017, less than half that of 2016.
The vacancy figures in the latest Colliers Essentials report are based on December 2017 data while the rates and yields figures are based on March 2018 data.
In an earlier national retail report, Colliers noted that strong tourist numbers were helping to boost retail sales and especially in the food and beverage sector; and that the retail property market was affected by ever-changing consumer preferences, saying: “Online shopping, ‘click and collect’ services, same day delivery orders, and food subscription boxes, are all gaining traction, and diverting traffic away from physical stores.
“Shopping centres have been evolving, with mall owners continuing to invest heavily in expansion to reinvigorate tenancy mix and enhance shoppers’ experience, through improved amenities like free Wi-Fi, retail laneways, outdoor dining areas and well-designed shared spaces.”
The report noted that, like in other commercial sectors, investors are struggling to find opportunities to purchase properties.
“The rise of e-commerce is constantly challenging traditional brick and mortar stores and shopping malls to adapt and evolve. Landlords will have to be realistic about rental uplifts but the underlying economic drivers for New Zealand remain strong.” For more content and thousands of listings go to www.truecommercial.co.nz