Auckland Suburban retail market snapshot Q1 2021
Our suburban retail market snapshot shows that the vacancy rate is almost double that seen in the CBD in 2H2020.
While suburban retail vacancy only increased 48 bps in 1H20, 2H20 saw a far greater increase in vacancy; up 226 bps from 10.8% to 13.0%. This represents an all-time high for our suburban survey and demonstrates the significant upheaval of Auckland's retail sector which began in 2H19 and persisted throughout 2020. The vacancy rate among suburban retail stock is almost double that seen in the CBD. However, with higher availability and lower rents, it is possible that suburban demand will increase with retailer strategies to relocate.
While there were no new completions during 2H20 and most suburban retail projects remain in planning, a handful of developments (around 6000 sqm) have trickled through the pipeline and are now under construction. This includes 914 sqm at Mansons' Parnell development and 3300 sqm for the Mercedes Benz Showroom in Takapuna. Minimal supply change can be attributed to COVID-19 which delayed progress on many developments and dampened investor prospects. Note also, the completion of Sylvia Park's 'Galleria' (bulk retail) will likely put external pressure on the supply of retail stock within our survey boundaries.
The net face rents for prime and secondary held flat over 4Q20, meanwhile the rents for regional centres fell 3.8% to $1,275 psm. Similarly, only regional centres saw any change in incentives, increasing from 9.5% to 10.5% over the quarter. We predict these metrics to hold into 2022, demonstrating market stabilisation post-COVID. Prime suburban and bulk retail markets saw slight yield compression during 4Q20, with upper yields decreasing to 4.25% and 6.25% respectively. In addition, prime suburban Capital Values were up 2% during 4Q20, now at $15,510.