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Bayleys Research


GREATER AUCKLAND RETAIL 2011

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Auckland’s retail sector is beginning to show signs of improvement with increasing spending year on year, although it remains under pressure as consumers are continuing to prioritise savings and debt reduction over spending on discretionary items. The latest retail sales statistics released by Statistics New Zealand (StatsNZ), for the year to March 2011 show sales to be up 5.4% on a year earlier.

 

 

While some of this increase in core spending can be attributable to rising food prices, a lift in consumer confidence, which has been apparent for a few months running, can’t be ignored as having a positive impression on spending growth. Forecasts for wage growth are increasingly positive, with labour shortages likely to become increasingly apparent and thereby placing upward pressure on wages. Strong rural income growth is also helping to improve consumer sentiment for the year to come.

Economic growth is likely to stay low for the remainder of the year, but in positive territory for the second half of 2011. Slowly growing momentum for the remainder of the year will lead into an average annual growth rate of 3% for the next four years, according to Treasury. This will aid the retail sector by adding impetus to business and consumer confidence.

These positive forecasts for economic growth are beginning to show in the retail property market, which appears to be improving, reflected in the findings of the latest Bayleys Research Auckland Regional retail vacancy survey. In 2009, well ensconced in the global recession, Auckland Regional retail vacancy was 3.5%. This decreased dramatically in 2010 and has dropped even further in the latest survey, currently sitting at 1.2%. This current vacancy rate is on a par with 2005, when New Zealand’s economy was heading towards its peak.

 

 

Looking at the individual sectors of retail property, bulk retail development has remained popular, with this sector of the market generally holding up as a result of the fact that, as with shopping centres, a majority of the occupiers are national or international brands. This type of regional shopping centre development has become quite dominant in Auckland, with the centres often combining both a shopping centre and bulk retail.

 

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