It’s a mixed shopping bag for Auckland retail sector
After an unparalleled year in the retail sector with the trickle-down effects of pandemic restrictions and supply chain disruptions, it’s a mixed bag in the retail property market around the Auckland region, according to latest data.
Bayleys Research’s Auckland retail market update shows:
■ An uptick in vacancy across established retail precincts
■ Bold new retail offerings finding their feet
■ Dwindling CBD foot traffic causing uncertainty
■ Growing success of large-format retail as an asset class and preferred retail destination.
Chris Beasleigh, Bayleys national director retail sales and leasing, said it’s not a one-size-fits-all situation in the retail space as Auckland wrestles with the ramifications of Covid-19’s long tail against a backdrop of changing consumer habits and infrastructure
challenges.
“In talking with our Auckland region retail landlords and occupiers, the playing-field is far from level with sentiment and confidence waxing and waning according to geographic location and business type,” he said.
“It’s been rough going for many – particularly those businesses heavily-dependent on international visitors and students, and those reliant on fully-occupied office towers in Auckland’s core, as a work-from-home ethos continues to encourage employees away from central workplaces.”
The average wage for a retail worker is now $25.05 an hour according to Retail NZ’s annual wages guide and, when coupled with escalating freight costs and ongoing global supply chain woes, it’s changed the base fundamentals for occupiers and landlords.
“It’s a jungle out there, frankly, and the pressures on Auckland CBD businesses in particular is immense. There’s been much talk about the demise of Queen St off the back of major pedestrian and vehicular disruptions from City Rail Link work and unpopular council initiatives that limit movement along the once-prime strip.
“After the main lockdown decimated foot traffic, business association Heart of the City research found an overall drop in the average number of pedestrians on Queen St of around 30 per cent since mid-2018.”
Retail vacancy rates across the Auckland region now average 8 per cent, twice that recorded in 2019.
Central Auckland has reached 9.44 per cent vacancy, largely reflecting the challenges with Queen St, sitting just behind South Auckland, where retail vacancy hit 10 per cent – the highest recorded since Bayleys Research started tracking retail vacancy in 2002.
“The North Shore has done relatively well, with vacancy currently sitting at 4.62 per cent and only slightly higher than in 2019, but the new star performer is West Auckland,” said Beasleigh. “Bucking the regional trend, vacancy levels dropped by 1.6 per cent to 6.29 per cent and this can be attributed to the high level of bulk retail in the area and consumers preferring to shop in suburban malls closer to home.”
Beasleigh said innovative new retail precincts with points of difference show there is still an appetite for shopping centres as an asset class. He cited Commercial Bay, which is trading well despite lower pedestrian counts in the CBD, Westfield Newmarket on the city fringe and Ormiston Town Centre in southeast Auckland,
“The success of these destination precincts has come at the expense of strip retail, but that’s a dynamic that needs to find a new settling point. It’s yet to be seen what further large-scale retail development will occur in the changed business environment,” said Beasleigh.
“In the year to March 2021, there were more than $137 million and $120 million of new and refurbished retail space consented, respectively. This is a marked drop from the development peak in 2019, however, when new and refurbished consents totalled $620 million.”
New retail consents were concentrated in West Auckland, which accounted for 29 per cent of all consents and included the Northwest area where the circa-14,000sq m Costco development is forecast for completion in 2022.
The large-format retail sector remains counter-cyclical as an asset class, attracting strong investor demand due to location, steady rental rates, established national and international tenants and long leases. “It is the only retail asset class in Auckland that decreased in vacancy, reaching a low of 3.75 per cent in 2021 and assisted by the fact that occupiers were generally able to trade through the height of the pandemic lockdowns and restrictions,” said Beasleigh.