Vacancy rates are heading down across all three sectors of the commercial and industrial market on the North Shore, with retail having the highest occupancy level.
Sarah Davidson, analyst for Bayleys Research, says the latest vacancy data is showing an improvement in the North Shore retail sector, bucking the slowing recovery trend experienced in the Auckland region.
The annual Bayleys retail survey analyses the three major types of retail in the North Shore - strip, bulk and shopping centre - with this year's survey showing an overall vacancy level of just 1.8 per cent, a reduction on the 3 per cent rate in 2011.
The increase in overall occupancy is a consequence of reduced vacancy in both strip retail and shopping centres, while an increase in bulk retail vacancy hasn't made a marked difference, says Davidson.
"Strip retail vacancy has generally had a strong influence on the North Shore vacancy rate, peaking at over 10 per cent in 2009 which pushed the overall vacancy to close to 6 per cent.
"However, strip retail's vacancy reduction to 3.2 per cent in the last survey has helped pull the North Shore vacancy rate down again, in conjunction with negligible empty space in shopping centres."
New developments on the North Shore have been of particular interest to tenants, says Nick Howe-Smith, a director of Bayleys North Shore Commercial. As many as five new retail projects are under way on the North Shore, with keen interest resulting in some being almost entirely pre-let prior to completion.
A number of convenience centres are being developed in Albany.
In an 11-unit retail development undertaken in Apollo Drive by Northbridge Properties, nine units sold off the plans to a combination of owner-occupiers and investors, and two were leased.
Northbridge is also proposing a larger retail centre at 94 Rosedale Rd, the first stage of which will involve 17 units from 61 to 300sq m, including an Asian supermarket, and is scheduled for completion in 2014.
Northbridge is also involved in a 13-unit retail development in Corinthian Drive, as part of Sydney-based Goodman Group's 12.1ha Orchard Park office and light commercial development.
And nearing completion is Kea Developments' 11-unit retail complex at 329 Albany Highway.
Bayleys North Shore Commercial is involved in the sale or leasing of units in all these developments.
Howe-Smith says investors have retained strong interest in retail property offerings.
"However, as with any form of property investment at the moment, the more secure the cash flow the firmer the yield," he says. "Potential investors are interested in tenants which have a proven trading history, in particular national or international tenants and, failing that, long-established local tenants.
"Initial yields can soften by as much as one percentage point between grades of tenant."
Davidson says good-quality food retailers are also being considered prime, over and above fashion and other discretionary-goods retailers, because they are perceived as being less susceptible to the burgeoning online retail market.
An example of this was the recent Bayleys Greater Auckland auction of a purpose-built Burger King facility at 112 Apollo Drive in Albany. It sold for $2.53 million at a 5.8 per cent yield on its 10-year lease to April 2017 to Antares Restaurant Group, exclusive New Zealand franchise development rights-holder for Burger King.
Davidson says over the coming year retail investment stock will likely be even more sought-after, with some residential investors from the pumped-up Auckland market looking for better returns on their investment which commercial property can provide.
North Shore retail survey
Source: Bayleys Research
Feature: Vacancy rates drop
Now at: 1.8 per cent
Compared to: 3 per cent in 2011.