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Bayleys Research


NEW ZEALAND RETAIL 2009

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Retail 2009

Nationwide there has been a shift from a market that was heavily in favour of the landlord to one in which the tenant has more influence during leasing and rent review negotiations. Tenant retention has become the key concern for landlords throughout the country as a result of increasing vacancy, according to the latest Bayleys Research Retail Property Survey.

Over the last 12 months, vacancy rates in almost all of the markets included in the survey have increased, mostly ranging between five to 12% in the core retail areas, which include central main shopping centres and closely associated areas.

As a result of increasingly struggling retailers and increasing core vacancy, landlords have needed to become more flexible in working with financially strained tenants. Results from the retail property survey show that across all areas, tenant retention is essential given the limited amount of enquiry for new space, especially on secondary premises. To this end the use of incentives has increased, particularly during rental reviews. This is in stark contrast to the market 18 months ago, when the use of key money to secure prime premises was increasingly prevalent.

Reduced rents and rent free periods have become more apparent in this latest period of the property cycle and, in the case of new tenancies, contributions towards fit out costs have been offered. Such incentives allow the tenant either to establish themselves in new premises or time to restructure their business model and become more cost efficient.

Despite the current weakness in the property cycle, retail property is still considered an advantageous long-term investment. This is supported in some areas with the ongoing commitment from developers to establishing new retail space. NZRPG is continuing with consented plans for a large scale shopping centre development in Tauriko, at the western fringe of Tauranga, with major retail anchor commitment. Construction is underway in Manukau City on a five hectare site, which upon completion will house Countdown and other associated retail & office. Furthermore, the Post Office Precinct and Mountaineer Redevelopment in Queenstown have continued and are almost completely leased.

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