WHAT A DIFFERENCE A YEAR MAKES

Spending on behalf of businesses and consumers has been fairly heavily contracted over the last 12 months, suffering at the hands of global economic weakness. During periods of uncertainty, as we are experiencing currently, retail spending will often reduce markedly as budgets are stretched to their limits and households work through the deleveraging process. Spending on essential items is maintained, with spending on non-essential items and luxury goods put on hold.

This has been reflected in the latest results of the Bayleys Research 2009 Auckland Regional retail survey. Regional vacancy reached 3.5%, according to the latest survey results, up on the 1.5% vacancy rate recorded at the beginning of 2008. From the graph below we can note the highest levels of vacancy were recorded in North Shore City and Waitakere City. Vacancy in these centres is most noticeable in sectors where the pedestrian count is lower, such as at extreme ends of strip retail precincts.

Manukau City’s vacancy remains low at 1.71%. There is a high level of shopping centre retail and large format retail in Manukau City, which typically operates at lower vacancy rates than strip retail, which has helped to protect the city’s vacancy. However, vacant units were noted in both formats during the course of the survey.

Auckland City vacancy has increased only marginally to 3.3%, from 2.7% 12 months ago. While vacancies were observed on Queen Street, there were few and mostly in areas where pedestrian traffic is less. There was only one vacant unit observed in Lower Queen Street, which stretches north from Victoria Street, with vacancy increasing south of Victoria Street.

 

 

On a sector-by-sector basis, bulk retail is still the best performing in terms of vacancy, a reflection of the typical nature of bulk retail tenants. They are generally national chains, which are well established and better equipped to survive difficult trading conditions.

Likewise, shopping centres recorded a low level of vacancy at below 2.0%, although it is an increase on last year’s sub-0.5% recording. For the first time in a number of years vacant units were spotted in all shopping centres included in the survey. However, the rate of vacancy is much lower than that seen in strip retail precincts and reflects the secure holding these centres have in the retail property market.

 

 

It may take time for consumer confidence to return to positive levels, which will be the catalyst for growth in retail spending. Market reports suggest that off-shore retailers, who have been trying to get into the New Zealand market for some time, are making use of the opportunities now evident in some of Auckland’s major retail areas. Key money is no longer a requirement to gain premises in lower Queen Street for example. Instead incentives are being offered for retailers to take the space. This will ensure that those opportunistic retailers are in a prime position when confidence returns and retail spending returns to increasing levels.