CBD Revitalisation Offers Encouragement For Auckland Retail Rebound

Market snapshots: CBD revitalisation offers encouragement for Auckland retail rebound while prime office and industrial sectors remain in strong demand across all three major centres

Auckland has seen a positive rebound in retail occupancy according to JLL’s latest commercial property snapshots, released today.

JLL NZ’s Head of Research, Gavin Read, says that despite an additional 3210sqm of space becoming available, retail vacancy in Auckland’s CBD actually decreased in the last quarter of 2022 to 8.2%, with space around the city’s future rail stations in particularly high demand.

“With the recent pedestrianisation of Queen Street, workers returning to the office and the restart of tourism, we’ve already seen retail vacancy rates steadily decrease. Added to this we now see many retailers eyeing up opportunities ahead of the scheduled completion of the City Rail Link in 2024.”

Office vacancy in Auckland’s CBD is also down. While overall vacancy sits at 10.8%, the ‘flight to quality’ trend of companies seeking quality locations and amenities to attract and retain staff has widened the gap between premium and secondary space vacancies, now sitting respectively at 5.4 and 16.3%.

“We are also seeing evidence that the flight to quality trend is extending out to more suburban areas like the North Shore and South Auckland too,” says Read.

Auckland industrial space also continues to be in high demand, with South Auckland leading the way in annual city-wide rent rises at 16.2%. Similar demand can also be seen across our other major centres, as evidenced by Christchurch industrial rents rising for the third quarter in a row to now sit at $141 per sqm – a trend Read expects to continue into the future.

“While Christchurch still has reasonable land for future development, a significant proportion of this is land-banked by developers, so industrial space is expected to become scarcer over the next few years,” he says.

Read also says the latest snapshots signal a welcome new defining market characteristic as investors and developers are increasingly motivated to contribute to net zero emissions targets.

“Most developers are now looking at how to refit or repurpose commercial property rather than demolish and build new.”

Wellington Q4 2022 snapshots at a glance

• Gross average rents for prime office increased by $7 to $635 per sqm; secondary up by $5 to $389.
• Vacancy for CBD office space increased for the first time since Q2 2021, from 3.3% to 3.8% - or an additional 5,719 sqm of available space.
• Precinct Properties continues to extend its presence in the capital, announcing a partnership with American private equity group PAG, covering two office properties at 40 and 44 Bowen Street. Precinct has also acquired 61 Molesworth Street in Thorndon, with expectations to develop the property at an estimated cost of $250M.

Christchurch Q4 2022 snapshots at a glance

• Average net prime rents for the CBD office space increased 4.2% to $375 per sqm. These are expected to increase by another 4.0% during 2023, supported by limited new stock coming to market and continued low vacancy.
• In an already tight market, CBD office vacancy decreased from 4.6% to 4.0%. Suburban vacancy also decreased from 9.6% to 4.9%.

JLL’s Q4 2022 market snapshots for the industrial, office and retail sectors in Auckland, Wellington and Christchurch are available for download:

• https://www.jll.nz/en/trends-and-insights/research/industrial-market-snapshot
• https://www.jll.nz/en/trends-and-insights/research/office-market-snapshot
• https://www.jll.nz/en/trends-and-insights/research/retail-market-snapshot

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