CBD retail strips remain tight but rents are static

Auckland's retail vacancy rate is up to 2.6 per cent, while Wellington dips to 6.9 per cent

The CBD retail strips in Auckland and Wellington remain tight but rents are static as retailers wait for the right spaces to become available, Colliers International research has found.

The latest Colliers Essentials research reports, released today, provide a snapshot of the retail real estate markets in the North Island’s two largest centres.

In Auckland, the overall retail vacancy rate has increased to 2.6 per cent, up from 2.3 per cent a year earlier.

The CBD strip vacancy rate has dropped to 3.5 per cent, while the shopping centre vacancy rate has increased to 2.3 per cent.

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.

“The demise of some well-known retailers last year highlights the competitive nature of the retail market, and the growing threat of e-commerce,” he says.

“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.”

In Wellington, the overall retail vacancy rate has dropped to 6.9 per cent, down 1.9 percentage points from a year earlier.

The prime Lambton Quay retail strip recorded the only increase in vacancy out of the seven precincts surveyed, but vacancy is still low at 4.6 per cent.

Among the newest shops is cosmetics retailer Mecca, which has taken up 484sq m of ground floor retail left behind by Topshop at 256 Lambton Quay.

“Retailers are waiting for the right space to become available. This is likely to keep prime rents static over the short term,” Lee says.

“Non-core locations enjoyed modest rental growth, as refurbishments reduced the total stock available in some precincts.”

Lee 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.

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