Half yearly health check for key markets
Colliers’ Associate Director of Research and Consultancy, Chris Dibble, provides a half-yearly health check on the state
of the country’s retail markets and central business districts.
Auckland, 4 September 2015
Mid-year is a strategic period in the commercial property market for Colliers International’s Research and Consultancy
team. It serves as a key barometer on how the market is progressing to date, and more importantly what trends can be
identified for the months ahead.
Below are key findings from each of the reports. The full reports are an attachment with this Media Release.
RETAIL:
• The level of demand for retail space in Auckland CBD, the suburbs and shopping centres symbolise a market on
fire. The region’s 2.4% vacancy rate is the lowest since 2007.
• Developers in Auckland have upped the ante to satisfy demand, but pressure remains for rents to rise. Not all
retailers are able to absorb higher costs, with economic headwinds, the growth of online shopping, competition for space
and a new era of consumerism likely to produce challenges for some retailers.
• In Wellington, 2015 is turning into a pivotal moment of change for retail. Rising offshore interest is a major
turnaround, boosted by David Jones and Seed Heritage setting up shop. Rumours of Topshop opening have added fuel to the
fire. The positivity will spread, leading to rental rises that boost investment activity.
• Christchurch CBD retail is on the cusp of a return to prosperity, enabled by new private sector developments.
Adequate car parking and the astute timing of key anchor projects remain the sector’s hurdle- they are both necessary to
influence any significant boost in pedestrian count. Outside of the CBD, retail’s footprint has expanded significantly
and is flourishing.
• Beyond the main centres, retailers doing best are those in growing catchments well serviced by an increasingly
wealthy and growing resident or tourist population. In underperforming CBD retail locations, new office, residential and
student developments are heralded as key catalysts to increasing pedestrian counts and driving retail spend up. The
continual rise and popularity of suburban convenience centres and large format retailing remain key areas of
consideration for retailers, investors and planners for the future.
CBD Office:
• Auckland CBD office employment has increased by more than 20% in the past five years. The result of such rapid
growth is a record low 6.2% vacancy rate. Prime vacancy continues to bounce around at next to nothing and is the lowest
in Asia Pacific. Developers are keen to alleviate the pressure, with a significant construction pipeline in place. In
the meantime, rents are rising quickly.
• The low availability of Wellington CBD’s prime office space is an on-going trend. It has recorded a sub-5% prime
vacancy rate for the last decade. This has flowed to other sectors, with B-grade vacancy halving in the past two years.
New developments are taking place which will achieve new benchmark rents. Investor confidence is growing.
• Hamilton’s office market has stabilised after a strong year in development activity and associated rent rises.
The predominant activity for the short-term is centred upon redevelopment and refurbishment of older premises to lift
the quality of the work environment to attract and retain tenants.
• Christchurch’s rebuild activity for CBD office space has increased slowly over the last year. There are a number
of major office developments under construction with expected completion from late this year through until early 2017.
All major A grade tenants have now secured space, which will leave a sizeable amount of vacant space available. This
will be attractive to businesses in the suburbs who will progressively return to the CBD once leases expire. However,
some hurdles will need to be met before that happens.
• Dunedin’s overall office vacancy rate decreased in June. Good quality, refurbished and strengthened premises
remain tenants’ office accommodation of choice. Landlords are progressively coming to terms with new requirements, costs
and the necessity of such works to keep and attract tenants. Investors are factoring capital expenditure requirements
into their purchases, making for a cautious, but robust investment environment.
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