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‘High demand for luxury retail, office space and minor relief in construction costs’

– Premium CBD retail thriving with big brands moving in, expected to maintain growth

– Auckland office space demand increases year-on-year by 7.5%, demonstrating need for quality locations

– Strong competition for quality industrial space for warehouses and data centres continues

Auckland, 20 February 2024 – Premium brands are moving into CBDs, businesses are consistently seeking quality office locations, and rents for industrial properties are on the rise, according to retail, office, and industrial property data released today by JLL, an industry leader in real estate and investment management.

Luxury locations leading the retail market

Premium brands are revitalising Auckland CBD’s retail scene, demonstrated by a 9.8% increase in average net prime CBD rents during 2023. This high level of demand is set to continue, with a further increase of 4% expected for 2024, bringing more luxury retail to the city centre. In the lead-up to Christmas 2023, the CBD also saw the opening of Christian Louboutin’s New Zealand flagship store in Queen’s Arcade and other premium leases beginning in Commercial Bay, further strengthening the retail activity.

Several big scale suburban retail projects are expected to complete during 2024-2025. These include new developments at Mānawa Bay, Mangere, and Ikea, Sylvia Park, as well as refurbishments at Highbury, Birkenhead, and Dress Smart, Onehunga.

Christchurch CBD retail is increasingly active, with the recent expansion of Australasia’s largest Mecca opening on Cashel Mall and opening of Baby Bunting’s Addington store, the retailer’s largest in the country. Due to these movements, Christchurch CBD saw vacancy rates falling and an increase in retailers looking for locations, with the average net CBD rents increasing 17.4% during 2023.

The demand for retail spaces in central Auckland and Christchurch show New Zealanders are still after brick-and-mortar experiences,” says Gavin Read, JLL Head of Research New Zealand.

Demand for quality Auckland office spaces continues to rise

As central businesses look to attract and retain employees with prime office facilities in accessible and connected locations, Auckland CBD office rents are also on the move, with average net prime rents increasing by 1.3% (+$8psm) to $589psm. This signifies a strong 7.5% year-on-year increase in prime rents. While vacancy increased across most precincts and grades for 4Q23, premium reduced to 1.6% for the quarter due to occupier demand for quality office space.

There are three office buildings currently under construction or being refurbished in Wynyard Quarter along with three buildings under development elsewhere in the CBD, which combined are expected to add over 100,000 sqm by 2026.

When completed, these are expected to attract tenants from the lower end of prime and upper end of secondary properties, as more and more organisations compete to secure prime offices, especially as most of these developments are pre-committed.

Industrial developments booming in Auckland’s North-West

As forecast, industrial rental growth continued throughout the year, with the demand and supply imbalance underpinned by strong demand for quality industrial space. While we have started to see a trickle of transactions this year, although more than $3 billion, we are well off the highs seen in 2021 across the value and volume of properties sold.

“Although lately there has been minor relief in costs of construction, it is still believed that the level of rent needed to support the viability of development projects and the willingness for occupiers to pay at those forecast levels, may inhibit some developments. However, there are several significant developments ongoing in Auckland’s North-West”, says Gavin.

One of these is a new business park being developed by New Zealand Retail Property Group at 14 Northside Drive, Westgate. This will have properties ranging between 350sqm and 1,500sqm. A new warehouse construction is also underway by Kea Group at 29-33 Westpoint Drive, Hobsonville. At 88 Hobsonville Road, Citadel Capital is developing a 3,500sqm commercial unit within Westpoint Business Park. In addition to industrial warehouses, North-West Auckland remains an area of interest for data centres as well as for branch offices of national brands.

 

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