Colliers International Research presents a three-part review of the key commercial property sectors
Physical retail stores in New Zealand capture more than 90 per cent of all retail sales, and spending continues to edge up on an annual basis. This provides a supportive base and positive outlook for retail real estate in New Zealand.
In the year to June 2019, approximately $95 billion of retail trade in ‘bricks and mortar’ properties took place. This is up almost 4 per cent compared to the previous year. The biggest winners were in non-discretionary sectors, with consumers more selective in their discretionary spend, an ongoing trend over the past decade.
With a solid base in place, forecasts remain for further growth and expansion. Evidence of this is the latest medium-term employment forecasts from MBIE. The retail trade sector is forecast to grow by an additional 19,829 workers between 2018 and 2023, representing annual growth of 1.6 per cent per annum, comparable to the annual average growth for all industry groups.
The variance in retailer vacancy rates by asset type and location continues. Retail premises without a supportive retail mix in an underperforming catchment are experiencing the most testing conditions. Destination retail centres with a customer-centric strategy providing entertainment and leisure experiences continue to receive the most enquiry, no matter the location.
Nationally, consenting activity has reduced from recent highs, but the total value continues to rise. This highlights the elevation in customer requirements and the extent of works that developers and landlords face in retail. Variances between demand and supply provide the guidance for rental performance for landlords, but tenants in many precincts across the country still face annual rental rate rises.
While investor confidence in the sector remains supportive, investment yields have firmed slightly or have been relatively flat over the past 12 months. This has not reduced the proportion of deal flow in the sector. Our analysis of commercial and industrial sales data shows purchasing interest remains strong for retail assets, with just under 30 per cent of all 2019 transactions in the retail sector. This is up slightly on previous years. With almost $1 billion in retail assets transacting in 2019 so far, and many more large retail deals to be completed, the outlook for retail investment remains solid. We forecast investors to remain vigilant in their due diligence and cautiously confident in their purchasing decisions.
2019 Commercial Property Review - New Zealand industrial market
2019 Commercial Property Review - New Zealand office market
2019 Commercial Property Review - New Zealand retail market