Auckland CBD Retail Market Snapshot Q3 2019
Upper-tier retailers continue to drive elevated demand for prime CBD retail space.
Upper-tier retailers continue to drive elevated demand for prime CBD retail space. Further leasing activity and uptake of backfill opportunities characterised the quarter, especially in the lower Queen Street and Britomart precincts. Many stores including the former Hugo boss space have also been re-leased off-market, illustrating the occupier appetite in this segment. We expect Commercial Bay to satisfy much of this high-end demand upon its completion and provide the Auckland retail market with a boost of prime stock. Demand for secondary space is expected to remain subdued with a number of premises available further up Queen Street.
Several developments within the CBD and Wynyard Quarter areas are set to provide additional retail space in the coming months. Significant changes are expected when the Commercial Bay retail component completes early next year, in addition to several large refurbishment projects currently underway returning much-needed retail stock to the market. In Wynyard Quarter alone, 10 Madden Street, the Park Hyatt, and Travelodge combined will provide 4,000 sqm of new retail space on completion. The Commercial Bay retail space is almost fully pre-leased, with noteworthy international brands having been confirmed including Calvin Klein, Tommy Hilfiger, and Scotch & Soda, raising pre-leasing levels to 95%.
Rents in the CBD retail market have continued to fall, with prime CBD net face rents now at $2,873 psm, a 0.6% reduction from last quarter. This downward trend is expected to continue until Commercial Bay completes.
No large transactions for retail stock were recorded for the CBD this quarter, reflecting market sentiment in response to changing conditions. The growing threat of e-commerce has left many investors wary of acquiring underperforming assets, and as a result we expect yields to continue to soften.