Auckland Retail Suburban market snapshot Q3 2020
1H20 saw suburban retail vacancy increase 50bps to 10.8% overall. This shows the continuing effects of the significant upheaval Auckland's retail sectors have continued to experience over 2020. Given the sector was already dealing with the effects of Westfield Newmarket and Commercial Bay opening in 1H20, COVID-related shocks exacerbated the hardships already facing retail. Though spending anecdotally began to come back again at COVID-19 Alert Level 2.5 in Auckland, practical customer restrictions, such as social distancing requirements, inevitably impacted sales performance.
With no new completions over 1H20, the total stock remained at 208,206 sqm. Very few projects are currently under construction. Some secondary retail spaces have also begun to be utilised as office/showroom space, helping to fill vacant space by accommodating to a wider occupier market.
Though suburban retail has fared better than CBD retail in terms of sales volumes over the past few quarters, international border closures continue to reduce income prospects. As such, it stands to reason that current supply trends among the suburban retail areas will be prolonged.
Suburban net face rents have continued to fall over 3Q20. Average prime suburban net face rents fell 7.3% over the quarter to $950 psm, with average secondary suburban net face rents falling 3.7% to $325 psm. Meanwhile, average prime and secondary suburban yields held static at 6.25% and 9.00% respectively.
Like in the Auckland CBD retail market, we expect prime assets to continue to be the major focus for inventors with much less interest in secondary assets and tenants with poorer covenants.