Demand for luxury retail and prime office space surge – JLL

"New Zealanders are still after brick-and-mortar experiences," expert says

Demand for luxury retail and prime office space surge – JLL

JLL’s latest report highlighted a boom in luxury retail and premium office spaces across New Zealand’s major cities, with a slight decrease in construction costs offering minor relief to developers.

Luxury retail flourishes in urban centers

The retail market in Auckland’s CBD is experiencing a renaissance, led by premium brands that have driven a significant 9.8% rise in average net prime CBD rents in 2023.

This trend is expected to persist, with an additional 4% increase forecasted for 2024. The recent openings of high-end stores, including Christian Louboutin’s flagship in Queen’s Arcade and other luxury brands in Commercial Bay, underscore the vibrant retail activity in the city center.

Suburban retail projects are also on the rise, with major developments at Mānawa Bay, Mangere, and Ikea, Sylvia Park, slated for completion in 2024-2025, alongside refurbishments at Highbury, Birkenhead, and Dress Smart, Onehunga.

Christchurch’s CBD is not far behind, witnessing active retail expansion with notable openings like Australasia’s largest Mecca on Cashel Mall and Baby Bunting’s Addington store. These developments have led to decreased vacancy rates and a surge in average net CBD rents by 17.4% in 2023.

“The demand for retail spaces in central Auckland and Christchurch show New Zealanders are still after brick-and-mortar experiences,” said Gavin Read (pictured above), JLL Head of Research New Zealand.

Office spaces in high demand

Auckland’s CBD office market is also thriving, with average net prime rents climbing by 1.3% to $589psm, indicating a strong year-on-year increase of 7.5%. Despite a general rise in vacancy across various precincts, premium office space vacancy dipped to 1.6% in the fourth quarter of 2023, reflecting the growing demand for high-quality office locations.

The ongoing construction and refurbishment of office buildings in Wynyard Quarter and other parts of the CBD are set to add more than 100,000 sqm of space by 2026, attracting tenants seeking premium office environments.

Industrial developments on the rise

The industrial property market has seen continued rental growth throughout the year, driven by robust demand for quality industrial spaces. While transaction volumes have decreased from the highs of 2021, notable developments in Auckland’s North-West are ongoing, providing much-needed supply.

“Although lately there has been minor relief in costs of construction, it is still believed that the level of rent needed to support the viability of development projects and the willingness for occupiers to pay at those forecast levels, may inhibit some developments. However, there are several significant developments ongoing in Auckland’s North-West,” Read said.

Projects like the New Zealand Retail Property Group’s business park at 14 Northside Drive, Westgate, and Kea Group’s warehouse construction at 29-33 Westpoint Drive, Hobsonville, are examples of the significant industrial developments underway. These, alongside Citadel Capital’s commercial unit within Westpoint Business Park, highlight the region’s appeal not only for industrial warehouses but also for data centers and national brand branch offices.

For more detailed insights, the full JLL reports are available for download.

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