Convenience stores, discount outlets and souvenir shops are disappearing from Auckland’s CBD as an increase in rental rates see larger national and international chains secure inner-city premises.
Lower-end retailers are being pushed out of Auckland’s central business district (CBD) due to an increase in demand for quality retail space, according to Colliers International.
“Retailers such as convenience stores, discount outlets and souvenir shops are being forced out of the CBD – particularly Queen St – due to a surge in demand that has seen rental rates increase thanks to the limited availability of retail stock,” says Colliers International’s retail leasing associate Director Nilesh Patel, who specialises in the Auckland CBD and CBD fringe leasing markets.
“For example, Global Culture has taken the former City Convenience store and Istanbul Kebab stores at 94 Queen St and telecommunications giant Spark is now trading out of the former Fix Convenience Store on the corner of Queen St and Wyndham St.
“The arrival of larger chains – both national and international brands – is seeing lower-end operators driven out of, or to different precincts within, Auckland City.
“Landlords now have the ability to charge more rent, which in turn will also add more value to their buildings.”
It’s a trend that Colliers’ brokers first noticed post 2011 – and after the Rugby World Cup – which has become even more prevalent in the last 18 months.
“New Zealand is really starting to be recognised on the world stage and this is translating into significant tourist retail spend within the Auckland CBD – particularly from the likes of cruise ship tourists and visitors coming into the country.
“Tourism New Zealand anticipated that the 2015 to 16 season would welcome 127 cruises, with the economic impact to New Zealand forecast to be $543 million (Auckland City Centre is one of the main docking points).”
An increase in global exposure means New Zealand is also seeing the arrival of more international tourists on its shores – from 86,596 in 2010 to 104,418 in 2015.
“Global brands are capitialising on the increased super-diversity of Auckland, and streets of the CBD are starting to reflect that with more and more of an international flavour,” says Patel.
“Auckland really is starting to feel like a global city, alongside the likes of Sydney and Melbourne.”
Vacancy rates are at record lows, with Colliers International’s latest research report showing vacancy in CBD retail leasing at 2.5 per cent.
“While rentals are increasing, there has to be a point of stabilisation. We are seeing a lot of off-market opportunities present themselves, with lease expiries well into the future,” says Patel.
“Precinct Properties’ development on the lower levels of the new PwC Tower is expected to provide the opportunity for approximately 100 retailers across 18,000sqm.”
Meanwhile, tenants have been given notice on the Downtown development, with construction due to start soon.
“A key benefit to the mall closing is the opportunity for new entrants in the Auckland market to establish themselves within the city,” says Patel.
“Further south, one of the newest additions to the mid-CBD is The Warehouse, which has now opened its store in the Atrium on Elliot.
“The mid-CBD precinct is expected to receive a lift in pedestrian flow in the future with the Convention Centre, City Rail Link Aotea station and the proposed Auckland NDG Tower.”