An interesting article yesterday on what is happening in the retail building market in central Auckland.
Cruise ship passengers and Auckland shoppers are providing the impetus for the redevelopment and popularity of the lower Queen St retail area, says Nilesh Patel, associate director of retail services at CBRE.
Following AMP Capital’s announced refurbishment of the lobby and ground floor level of its 15-storey tower building at 45 Queen St, to be occupied by international brands Christian Dior, Prada and Swarovski as well as ANZ bank, two new high-profile retailers are moving into the area.
Patel says that Johnstons of Elgin, a high-quality British brand noted for fine woollen and cashmere cloth, clothing and accessories will open its doors at 90 Queen St in October.
“This will be its first store in the New Zealand market, which is a strong indicator of the attractive nature of Auckland’s retail sector,” Patel says.
“We’re also going to see T2, the boutique tea shop, open at 87-93 Queen St right next to the existing Mont Blanc store, which will add to the increased quality of tenants in the lower part of Auckland’s main street.
It seems that the lower part of Queen St and some of its surrounds are really becoming the hub of high end retail in Auckland. Other big name brands already in the short section of Queen St between Fort and Customs St include Louis Vuitton and Gucci and Mont Blanc. Along with this there has also been some pretty stunning other changes like the upgrade of Fort St and neighbouring streets which has been a massive success on every level, particularly in hospitality which is up 400% on what it was before the upgrade. Some other awesome developments include the likes of Imperial Lane which links Queen St to Fort Lane.
So what’s causing all of these high end retailers to move to this location, why not instead be located further up Queen St, on High, in Newmarket or even out in a mall in the suburbs?
“The most recent pedestrian count data from the Property Institute show a healthy foot traffic picture, with numbers increasing to multi-years peaks at the lower end of Queen St and at their highest levels since 2009,” he says.
“It’s been a good five to six years since we’ve seen activity of this level in Auckland’s retail property sector. There was strong activity before the global financial crisis but we certainly haven’t seen the market behave like this since at least 2008.”
Patel says changes to pedestrian and vehicular traffic mean there are more shoppers on foot, and more people in the downtown area, including in Fort St where the streetscape has been redeveloped to make it more pedestrian friendly.
So the simple answer is people, and lots of them. Make it nicer and easier for people to walk and around the city and they will do so – who knows, they may even buy stuff. Wow, who would have thought that.
The article also notes that another aspect that is helping this area of town are the cruise ship passengers visiting the city with numbers increasing from 19,400 in 1996-97 to 214,000 in 2011-12 although considering about 50,000 people walk past here every weekday, the cruise passengers are a likely to be a very small number overall. Of course one of the biggest aspects that would have helped in increasing the number of people walking in the city centre, but one that isn’t mentioned in the article has been the increase in the use of public transport. We know that in the morning peak alone there are now over 34,000 people getting off buses, trains or ferries somewhere in the CBD which is up from about 21,000 in 2001. At the same time the number of vehicles entering the CBD has decreased by about 6,000.
Now it won’t just be PT that has driven this change, the revitalisation of other areas including the Britomart precinct, the other shared spaces, the viaduct and a little further away Wynyard have all helped to start making the city more attractive and inviting. All of this doesn’t help building rental prices though.
Patel says the redevelopment of lower Queen St is also driven by the popularity of the harbour area including the Britomart precinct and pedestrian access to the ferry terminal and Britomart Transport Centre.
“All these factors are having an impact on retail rents,” he says. “It’s noteworthy that the collective shift towards the bottom of the city isn’t necessarily being pushed by retailer capital or the Kiwi economy – it’s more about the lack of availability of properties. As a result we are seeing rents being forced up, with lease terms typically six years or more, incentives dropping and core vacancy levels dropping.”
Patel says there are also some clear and noteworthy rent distinctions appearing along Queen St: “Between Fort St and Customs St we are seeing rents average between $2500 to $3500 per sq m; from Victoria St down to the eastern end of Fort St we are seeing around $2000 to $2500 per sq m; and from Victoria St to Wellesley St it comes down to $1500-$2000 per sq m.”
With Electrification, the new bus network and other PT developments that are all meant to dramatically increase patronage I imagine the current trends will only continue. I guess if you are a building owner in lower Queen St you will be very happy with what is happening.