Retail vacancies in Auckland's central business district are falling, rents are rising, and a new luxury shopping hub is beginning to emerge.
These are the findings of a study released by Chris Dibble, Jones Lang LaSalle's research and consulting associate director, who noticed big changes in the area, which he found was squeezed by a lack of suitable prime space.
Some landlords had been unwavering in their negotiations with tenants, he said, noting that Zambesi, World, and Kate Sylvester were leaving High St after about two decades and moving to Britomart, where a spokesperson for developers Cooper & Company said 19 new shops opened last year.
Indications are that several more stores are considering moving.
Last year, Zambesi boss Neville Findlay blamed rising rents for the move, and said the opportunity to build a new flagship store in Tyler St was just too tempting to keep the High St shop.
Dibble said the scene was changing fast and the area around the Queen St-Fort St intersection had become Auckland's new hub of luxury retailers.
"With the Auckland Council completing the streetscape upgrade along Fort St and Fort Lane, the area is becoming a new retail hotspot.
"The move of High St retailers to Britomart, and the Imperial Buildings' transformation of under-utilised space into chic upscale retail, is another example of what savvy landlords are doing to compete for first-rate retailers in a tough trading environment."
Nathan Male of retail leasing specialists Metro Commercial said there has been little shop leasing activity in the prime Queen St blocks in the past year.
"Demand remains for prime space but there is nothing like the depth of demand that there was two years ago," he said.
"Rents have held firm in prime locations, but key money is now rarely paid, and leasing incentives have increased.
"Many Australian retailers have curtailed any new store rollouts unless the terms are particularly attractive. The move of three clothing brands to Britomart is a coup for Peter Cooper's company and will trigger further evolution of the High St precinct."
Metro is working for Zambesi and Kate Sylvester to dispose of their lease obligations, and Male thinks the shops will be re-tenanted quite fast. "There are some significant retailers who have been waiting to get into the High St area and been unable to source suitable space. These latest moves will allow some fresh names into the area. High St and Vulcan Lane remain in the very heart of the action in the city."
Dibble found that confidence in the retail sector had dipped slightly, yet the Auckland CBD retail vacancy rate decreased from 5 per cent in June to 4.5 per cent last month.
"Positivism should be evident, with trend data from Statistics NZ showing a general uplift in consumer spending. While indications [are that] overall retailer demand and supply is sufficiently balanced, prime premises continue to receive healthy levels of inquiry.
"The Britomart continues to be the centre for new development and upscale retail, with new premises opening in Commerce St. The Imperial Buildings at Lower Queen St also provide new chic retail space. This is a major gain for Britomart, but a major loss for High St."
He said a rise in CBD fringe office developments was adding to the total availability of retail space.
"Small footprint premises are proving popular, with food and beverage retail operators the most active as they look to satisfy office worker demands."
Rents had risen, and that was caused by the lack of suitable prime CBD space, unwavering landlords, and a tenant flight to quality.
Upper Auckland prime rents rose by 4.5 per cent last year. Average prime Auckland net face retail rents are around $1900/sq m, up 2.7 per cent.
Prime premises typically range from 40sq m to 250sq m, depending on store type, so tenants in bigger shops are paying around $475,000 annually, while boutiques pay $70,000 to $80,000.
"Retailers employing multi-channel sales strategies - 'bricks and clicks' - as well as focusing on their customers and offering a unique and all-encompassing retail experience will be positioned well for the next resurgence in mid to late 2012," Dibble said.