CBD prime retail markets across New Zealand’s biggest cities have continued to rebound this year, with Christchurch being the standout
All cities have experienced significant leases recently completed, highlighting the continuing demand from luxury/premium retailers for prime locations.
In Auckland, large-format retail has had $66.46 million in sales transactions this year. In Wellington, retail sales activity has been the quietest across all precincts for the past 18 months. In Christchurch, the upwards trend in average prime net rents continues, up 12.9% this quarter to reach $875 per square metre – circa 40% higher than the rent at the same time last year. This is on the back of low vacancy in the market, reducing to 4.4% after dropping by 0.6% this quarter.
Christchurch
• Prime rents continue to increase with further growth of 12.9% this quarter.
• Demand outstripping supply for large-format retail space in the thriving north Canterbury town of Rangiora.
• Transaction activity starts to pick up with ~$27 million in sales during the first half of the year.
For 1H24, overall vacancy decreased to 4.4% from 5.0%, highlighting a 60bps decrease. Inspecting the precincts, CBD vacancy reduced from 2.6% to 2.0%, evidencing the strong demand for CBD prime retail space. Average net prime CBD rents continue to increase, up by 12.9% this quarter, to reach $875psm. This represents a significant increase of 40.0% year-on-year.
This increase can be attributable to a seven-year low in vacancies impacting the upper end of prime CBD rents, which has seen a 35.3% year-on-year increase, now at $1,150psm. They are expected to reach $1,250psm by December 2024, primarily due to demand by international retailers and limited available space.
Demand is outstripping supply for large-format retail space in the thriving north Canterbury town of Rangiora. The latest entrants announced to move into the area are Bargain Chemist and CityFitness, both occupying large tenancies in the former Bunnings building on the corner of Queen and Victoria Streets. The property covers 4,500sqm and was sold to local investor Cantcomm Ltd. Notable transactions during the quarter were the sales of Buildings A & B, Rolleston Fields, Rolleston, for $8.80 million and $6.70 million, respectively. Another significant transaction was the sale of 367 Blenheim Road for $7.50 million.
Harvey Norman is opening a new store in the final stage of development in the large-format retail shopping centre, Northlink, on Langdons Road in Papanui. Construction of Stage Three, covering 7,865sqm, is now in full swing, taking the total floor area of Northlink to 29,500sqm on completion, with more than 700 car parks.
Auckland
• High leasing activity during the first half of 2024.
• Increase in leasing demand at the lower end of Queen Street predominantly by premium/luxury retailers.
• Large-format retail gains traction with $66.46 million in sale transactions this year so far.
JLL’s retail leasing team has had some very successful leasing activity over the last month. Swarovski’s current tenancy at 45 Queen Street has been leased to an international luxury retailer that will open a new flagship store mid-2025. The ground floor at 51 Shortland Street, previously home to Wok N Noodle, was leased to Hello Mister, which will be opening its seventh physical store. Ex-Roxy’s and Everybody’s nightclub has been leased to a new operator and will be opening in the coming months.
There has been an increase in leasing demand at the lower end of Queen Street, predominantly by premium/luxury retailers. Precinct Properties, through JLL, recently leased a space within Commercial Bay to diamond jewellery retailer Austen & Blake for its first physical store in New Zealand.
SkyCity Entertainment Group’s newly completed Horizon Hotel is expected to provide CBD midtown retail a boost. The SkyCity precinct now has almost 1,000 hotel rooms. It also marks another step towards the completion of the International Convention Centre.
Large-format retail gains traction with $66.46 million in sale transactions this quarter. A significant transaction was the sale of Mitre 10 in Whangaparāoa, located at 5 Wade River Road, Stanmore Bay. The property comprises a 5,436sqm store, purpose-built for trade retail premises situated on the corner of Wade River Road and Link Crescent, adjoining The Coast Shopping Mall. It sold for $13.75 million, reflecting an initial yield of 6.24%.
Mānawa Bay is on track to open this September, bringing New Zealand a fashion-led outlet experience with iconic brands such as Hoka, Swarovski, GUESS, Kate Spade, Michael Kors, and Helly Hansen.
Wellington
• International retailers Tommy Hilfiger and Calvin Klein open in the CBD.
• Rents for prime CBD unchanged since June 2022.
• Wellington Retail has been one of the quietest precincts for transactions in the last 18 months.
Overall vacancy for 1H24 reduced to 7.2% from 8.1%, down 90bps, equating to 957sqm. This constitutes CBD vacancy which decreased to 7.2%, and southern CBD, which decreased to 4.9%. This signals an expectation that vacancy may reach pre-pandemic levels of ~5% during the next few years.
Wellington’s premier large format centre, Capital Gateway Retail Centre, located near Thorndon Quay at 16 Gateway Lane, was leased in April 2024. 165 Lambton Quay’s transformation has now been completed, with Tommy Hilfiger, Calvin Klein, and AS Colour now open. Average gross prime rents for Lambton Quay have remained at $1,800psm since June 2022.
Willis Street average gross prime rents stayed at $1,050psm this quarter after a 10.5% increase in the first quarter of the year. The last significant transaction was the sale of 3A Whitford Brown Avenue, Porirua (Countdown Aotea) for $14.20 million. This property was sold in February 2024, being the only notable transaction recorded for this market for the first half of 2024.
Wellington Retail has been one of the quietest precincts for transactions in the last 18 months, with an expectation that this will not turn until the middle of 2025 on the back of heightened confidence around easing interest rates.
On the supply side, even with recruitment difficulties easing, the major concern for businesses is the level of sales in the current static economic climate. We have seen a trend starting in the capital this year, similar to Auckland, with increasing demand from luxury retail occupiers for prime retail spaces.
