Published 28 March 2007
Jones Lang LaSalle’s research indicates that vacancy rates within the majority of Auckland & Wellington precincts remain at historically low levels despite a slowdown in the retail boom.
JLL’s new national director of retail, Martin Hudson, said the high occupancy rate was driven by strong retail sales & a shortage of retail property stock. This trend was generally mirrored in shopping malls throughout New Zealand.
“The boom in retail spending, driven by low unemployment & rising house prices, has slowed in the past year but remains well above the lows evidenced in the previous economic cycle,” he said.
Retail rents in prime cbd locations continued to show strong growth and prime suburban rents were following a similar pattern. Conversely, secondary locations have seen minimal growth and the less popular suburbs were experiencing an increasing supply of “problem properties” with longer rental voids.
“In these locations there is a greater realism from both landlords & tenants to work more closely together, to the ultimate benefit of both parties.”
Yields on retail investment sales continued to decline to historically low levels, ranging from 6-7.5%, with levels down 50 basis points from June 2006, reflecting strong investor appetite for limited retail stock. Suburban yields were proving even more competitive, dropping to 5.5% for prime stock. Yield compression continued to dominate valuations of cbd & suburban retail stock and the investment climate for retail real estate continued to be buoyant, with abundant liquidity and scarcity of good product driving investment decisions.
“While conventional wisdom suggests many retail assets are fully priced, investors – both local & overseas – appear to be prepared to pay a premium for the safe haven of prime retail property investments,” Mr Hudson said.
Attribution: Jones Lang LaSalle release, story written by Bob Dey for this website.