HEADLINES: Retail vacancy steady at low levels Large development pipeline Big getting bigger, rest need to adjust ANNUAL 2018 | WWW.BAYLEYS.CO.NZ Auckland Retail 2018 looks set to be another solid year for Auckland’s retail property Slicing the vacancies up on a regional basis shows that only West Auckland sector. saw vacancies rise to 9.1% from 7.4% the previous year. Much of this vacancy relates to new bulk retail stock built in the emerging Westgate retail A strong regional economy, on-going high levels of migration to the city and precinct. We expect most of this new space to lease up over the coming a recent rebound in consumer confidence all bode well for retail activity. year as new residential subdivision activity increases in the immediate Consumer Confidence catchment area. The real challenge will be finding tenants to backfill the older, bulk retail space that is being vacated. 132 130 Auckland Regional Retail Vacancy by Sector 128 Jan 15 126 8% 124 Jan 16 7% Index 122 Jan 17 120 6% Jan 18 118 5% 116 114 4% 112 3% Vacancy Rate Vacancy 110 2% Jul 16 Jul 17 Apr 17 Jan 17 Oct 17 Jun 16 Feb 17 Feb Mar 17 Sep 16 Dec 16 Sep 17 Dec 17 Aug 16 Nov 16 Aug 17 Nov 17 Oct 16 Jun 17 May 17 1% Month SOURCE: ANZ-ROY MORGAN 0% Strip Retail Shopping Bulk Retail All Retail This positive picture is reflected in the latestBayleys Research Auckland Malls retail vacancy survey which shows overall vacancy at 5.1%, holding at SOURCE: BAYLEYS RESEARCH similar low levels to that recorded in the last few years. Strong population growth across the entire Auckland region is driving a wave of regional centre expansions. Around 100,000m2 of new regional Auckland Overall Retail Vacancy retail space is currently underway or planned to commence this year with more planned for 2019. We have highlighted the major projects in Table 1 6% over page. 5.1% 5.1% 4.8% 5% 4.5% Auckland Retail Vacancy 4% 10% 9.1% Jan 17 Jan 18 3% 9% 8% 7.4% Vacancy Rate Vacancy 2% 7% 1% 6% 5.4% 5.0% 4.8% 5% 4.5% 4.3% 4.1% 0% 4% Jan 2015 Jan 2016 Jan 2017 Jan 2018 Rate Vacancy 2.9% 3% 2.8% SOURCE: BAYLEYS RESEARCH 2% 1% Analysing the vacancies by key sub-sectors shows strip retail and mall 0% vacancies remain relatively steady at 6.3% and 3.4% respectively with a Western Northern Southern Central Auckland Region marginal increase in bulk retail vacancies to 7.4% from 6.5% a year earlier. SOURCE: BAYLEYS RESEARCH 01 Table 1. Major Auckland Retail Projects currently underway or planned CENTRE PLANS Commercial Bay Retail Precinct Properties (PPT) Commercial Bay development in the northern CBD will include 18,000m2 of prime retail over 3 levels, including circa 100 stores (with almost half being specialty stores and the rest a mix of food and beverage and mini majors). As at February 2018 retail leasing commitments stood at 60%. The retail component will be launched in two phases – “Harbour Eats” will have seating capacity for 700 customers and is expected to be completed in the second half of 2018. The balance of retail is planned for completion in 2019. Botany Town Centre The centre is currently undergoing a $78m expansion and refresh which will add a further 4,700m2 of space, bringing the total to 62,700m2. Works are expected to be completed mid this year and will feature new retailers (local and offshore) , a new alfresco dining area and an update of the existing food and entertainment precincts. Sylvia Park expansion Kiwi Property Group (KPG) continues to expand its Sylvia Park offering. Projects recently completed include the $8.9million “the Grove” dining lane, and those currently underway include a new $80.2m 11,400m2, 10 level office and retail tower due for completion mid 2018 and a new $36.3m 5 level, 600 space carpark building due end 2018. Additional plans were also recently approved for a $223m “Galleria” retail expansion which will add a further 18,000m2 of space and is expected to be completed by 2020. The Galleria will add approx. 60 new retailers including a new 2 level 8,100m2 flagship Farmers dept store, new international brands and concept stores (yet to be announced), a café precinct as well as a further circa 900 carpark spaces. This brings the total number of carparks at the centre to 5,000. On completion of the current works Sylvia Park will have total retail space of over 90,000m2. This excludes the 16,500m2 Sylvia Park Lifestyle complex across Mt Wellington Hwy. In late 2017 KPF also strategically acquired a 3.2ha property at 79 Carbine Rd and 10 Clemow Drive for $27.1 million for future eventual consolidation which brings its total Mt Wellington land holding to more than 31ha’s, ensuring the group’s retail dominance in the area going forward. Proposed new Drury Kiwi Property Group (KPG) spent $39.8m last year acquiring 42.7ha’s of Drury land (with an option on a town centre further 8.6ha’s) with plans to develop a town centre, to complement the existing Drury town centre over the next 20 years. The strategic purchase puts KPG in the box seat to capitalise on the expected population and employment growth to the south of Auckland, especially as the nearby 300ha Stevensons quarry is progressively developed into a major logistics/distribution and commercial precinct Westfield Newmarket Westfield Newmarket closed its doors in February 2018 for an extensive $790 million redevelopment of the centre which is anticipated to reopen end 2018/early 2019. Incorporating multiple sites over 4.5 hectares, the completed centre will have a gross lettable area of 88,150m2 almost triple the current 31,286m2 . Tenants will include Auckland’s first David Jones department store, a new format Farmers, a Countdown supermarket and more than 230 new specialty stores. Westfield St Lukes Media reports suggest Scentre Group is likely to commence the redevelopment of St Lukes once Newmarket is completed, which will probably be sometime in 2019. Details of what is proposed have not yet been announced. Westfield Albany Scentre Group has communicated plans for future upgrading of the Albany centre based on market needs. To date no details have yet been released. The existing centre currently sits on 20.8 hectares of land, has a gross lettable area of 53,395m2 and 146 retailers. Westgate The second stage of the NorthWest Shopping Centre - NorthWest 2 - opened in late 2016 and includes a dining precinct and as well as 4,442m2 of office space. Fletchers has been awarded the $26.9 million contract to build a 3,600m2 community centre next door which will include a library, community meeting spaces and exhibition centre. Ormiston Town Centre Part of a staged masterplan development, the Ormiston Town Centre is being developed by Todd Group and is expected to total 45,600m2 on completion. The first stage - a Pak’nSave and a number of food/other offerings - has already been completed. Much of this activity is being driven by institutional mall owners with an area grows. aim to future-proof their centres. This includes dealing with the onslaught Along with expanding their traditional retail offer with an increasing array of of online retailing (which will step up a notch with Amazon recently setting international brands most of these larger centres are placing significantly up a regional distribution hub in Melbourne) as well as ensuring their malls more emphasis on “customer experience” in areas such as food and are positioned to take full advantage of catchment growth through greater beverage, entertainment and well-being. This follows global trends where residential intensification under the Auckland Unitary Plan. malls are increasingly being transformed into destinations that people want Going forward the larger regional centres are likely to morph into major to visit for more than shopping and this includes adding public spaces, a retail hubs with Westfield Albany dominating to the North, Westgate in wider range of services, events and more. Mixed-use including office space the North West, Westfield St Lukes and Westfield Newmarket in the inner (as is occurring with Sylvia Park) and possible residential potential could suburbs, Sylvia Park to the Inner East, Botany Town Centre to the South increasingly be part of that mix for some malls going forward. Strategically, East and Westfield Manukau to the South. Longer term Kiwi Property all these extensions to the retail offer are in areas where online retailing Group also looks set to dominate further South in Drury with plans to develop a new town centre as population and employment growth in the 02 Auckland’s Major Retail Shopping Centres 1. Westfi eld Albany 6. LynnMall 11. Botany Town Centre 2. Westgate 7. Westfi eld St.Lukes 12. Westfi eld Manukau 3. Glenfi eld Mall 8. Commercial Bay Retail 13. Ormiston Town Centre 4. ShoreCity 9. Westfi eld Newmarket 14. Kiwi Property Drury land 5. West-City 10. Sylvia Park for future town centre GOOGLE MAPS cannot compete. and beverage has been particularly strong and will be further enhanced So while the big get bigger, what does the future hold for smaller retail when “Harbour Eats” the fi rst stage of Precinct Properties transformational properties? In many cases the environment will become more challenging. Commercial Bay retail offer opens in the second half of this year. The For Auckland’s smaller malls (ie. circa 13,000m2 to 30,000m2) they will balance is expected to be completed in 2019.