Rents have gone sky-high in Auckland's luxury brand shopping zone as rising house prices make us feel wealthier, spend more and the retail sector expands.
A new report out today from Colliers International showed retailers in the luxury or international precinct of lower Queen Street are paying $700,000/year or more for a single shop space.
That area is home to global brands including Nespresso, Gucci, Dior, Prada, Louis Vuitton, Hugo Boss and R.M. Williams.
Nilesh Patel, Collier's retail leasing director in Auckland, said tenancies with floor areas of around 100sq m in this precinct are paying about $400,000/year but larger footprint tenancies are paying as much as $700,000/year or more, making that area New Zealand's most expensive.
Suburban tenancies of about100sq m tenancy would only cost $150,000 to $200,000/year, he said.
Auckland average net prime rents rose 3.5 per cent between last year's second quarter and this year's, now ranging from $1700/sq m a year to $4200/sq m a year, compared to shop rents in Wellington's Lambton Quay where retailers are paying up to $1855/sq m a year, Christchurch up to $1200/sq m a year, Queenstown $2000/sq m a year and Dunedin $1150/sq m a year.
"A prolonged period of economic prosperity has encouraged consumers to spend more, and retailers to keep enticing them with great deals. The perceived boost in wealth from house price rises nationally is advantageous," the report said.
"While interest rates remain low, retail activity will remain high. Auckland's vacancy rates are at or near record lows depending on the sector. Construction activity is rising, but not enough in the right areas to keep rents from rising further. Investors remain extremely confident, which will push yields lower," the report said.
"Auckland CBD's vacant space is the lowest in eight years, with only 3030sq m of available space. However, the 2.7 per cent vacancy rate is up from 2.5 per cent last year. The key reason for this anomaly is the reduction in total stock due to the demolition of the Downtown Shopping Centre to make way for 100 new shops by October 2018. MidCity centre's first level retail continues to provide the majority of vacant space in the CBD," it said.
Premises for Tiffany & Co. and Chanel in Britomart are nearing the end of refurbishment which will provide additional luxury retail space to the CBD, the report noted.