Snapshot Q4 2019
The Westfield Newmarket expansion has brought a notable increase in vacancy this quarter while rents and yields remained stable.
A significant influx of new retail space, especially as a result of the near-complete Westfield Newmarket, has brought with it a notable increase in vacancy this quarter. Suburban vacancy increased 39 bps to 10.3% over 4Q19, with bulk vacancy doubling to 0.8% from 0.4% last quarter. As a result, total vacancy now sits at 7.0%, up 2.8% from 3Q19 levels.
The effect of Westfield Newmarket’s opening has been especially evident in Newmarket, where several retailers who had occupied their previous premises for some time, including Noel Leeming and Kathmandu, have moved into the new development.
Auckland’s suburban retail pipeline supplied 90,345 sqm in completions in 2H19 (the majority being Westfield Newmarket), bringing the total stock up to 208,206 sqm of suburban retail space. With Westfield Newmarket near complete however, the pipeline has slowed significantly. Going forward, much of the action in completing projects is set to be limited to the CBD.
Rents remained stable at 3Q19 levels across the board in 4Q19, with only Regional Centre rents continuing to fall slightly, now down to $1,495 psm from $1,500 last quarter. Yields also remained at 3Q19 levels this quarter. Prime suburban yields continued at 6.19%, with secondary suburban and shopping centre yields stable at 9.00% and 7.74% respectively. Prime capital values were also stable at $18,376 psm over 4Q19.
Looking forward, we expect yields to begin softening as the suburban markets absorb the large quantity of new retail space available. Additionally, the contrast between prime retail and secondary assets is likely to deepen over time as retailers and investors seek a flight to quality.
*Suburban retail survey areas include Newmarket and Takapuna