Christchurch Retail market snapshot Q3 2020

Demand

Christchurch's retail sector, like those across the country, has faced significant market challenges due to COVID-19, with tenants being fewer in number and existing businesses under pressure. We anticipate business closures, although predicting scale is difficult, especially during an election.

Overall vacancy has continued its divergent trend in Christchurch, and over 1H20, total vacancy fell 0.9% to 7.9%. On a submarket level, CBD vacancy fell to 9.0% from 10.3%, meanwhile suburban vacancy rose from 3.6% to 4.1%, highlighting the fluctuations between submarkets.

Supply

Net completions of 3,447 sqm were recorded in 1H20 and belonged entirely to the CBD retail sector. This represented an increase in CBD stock to 77,535 sqm and an overall change from 245,217 sqm to 248,694 sqm across Christchurch's retail market.

As reported in 2Q20, among these completions were the new build replacements for the Duncans Buildings on High Street, and the ground-floor retail space at Spark HQ in Cathedral Square. Various additional projects remain in the pipeline at the planning, construction and refurbishment stages, and have completion dates estimated out to 2022.

Asset performance

Mirroring trends in Auckland and Wellington, net face rents for Christchurch retail fell across the board, including 11.5% (q-o-q) for prime CBD space, now $575 psm, and 9.1% for prime suburban, now $375 psm. Average CBD and suburban yields held firm over 3Q20, however prime suburban capital values fell 9.1% from $6,346 psm to $5,769 psm. Any fall in CVs has been driven by poorer rental performance overall.

While we expect prime assets to be the major focus for investors compared to secondary assets with poorer covenants, uncertainty persists in the retail sector.