Christchurch, 8 May 2015 – After the Christchurch rebuild shifted into a higher gear in 2014, the region’s retail property sector looks set to take on the baton previously held by the office and industrial sectors and capitalise on sales and consumer confidence data, according to CBRE’s latest MarketView research.
Against a backdrop of Canterbury retail sales totalling $10.7 billion in 2014, representing an increase of 6.9% over 2013 (while NZ-wide retail sales grew by 4.0% over the period) recent leasing activity indicates rates of up to $1,200/sqm are being achieved in Prime CBD developments.
More predominant however are the rates being achieved in the Victoria Street hospitality precinct, with $500/sqm typical of the current market.
In addition, the research shows that at a time when major retail developments are now known and consumers are becoming increasingly optimistic, the total value of retail consents increased substantially in the past year, even if the number of consents issued within the sector trended lower.
Tim Rookes, CBRE Christchurch’s Managing Director, says: “Positive signs of the rebuild are apparent throughout the city, with the total value of consented work increasing to $849 million last year.
“The continued evolution of the hospitality and Prime CBD retail offering is expected to respond positively to the increasing population of office workers.
“Going forward, we can see a number of significant new central city retailing developments within the retail precinct on Cashel Street, comprising 4500sqm of retail at The Terrace, 2100sqm retail in the BNZ Centre and 2100sqm retail in the ANZ Centre - setting new rental benchmarks for Prime CBD retail premises.”
Office - consents up, rents softening
The number of office building consents also picked up at the end of 2014, in line with many announcements of committed and uncommitted developments, particularly in the central city.
Prime net effective office rents are currently assessed at $385/sqm, after a number of benchmark-setting leasing transactions showed $425/sqm as reflecting the upper end of the Prime rent range for new design-builds in the CBD Core.
Bonnie Stone of CBRE Christchurch says: “Two factors are beginning to take the pressure off the rate of rental growth, despite rising construction costs: firstly, a supply pipeline of circa 120,000sqm, and the fact that incentives - although low at present - are also now being offered.”
“Now, as tenants relocate back into the CBD, they are set to enjoy a plethora of options. This is somewhat of a double-edged sword, as landlords will find themselves competing with one another over an increasingly spoken for, and limited, set of occupiers.”
Industrial – sector “taking a breather” after dominating the volume of consents
After 211 industrial consents in 2014 added up to more than the combination of retail (57) and office (133) combined, research has shown that industrial returns are now being driven by location and network upgrades.
Prime rents for industrial business parks are at $118/sqm, net effective for combined warehouse and office. Prime rents remained largely unchanged in Q1 2015, with the 12-month growth rate now sitting at 3.6%. Over the past three years however, industrial rents have increased 21.9% for Prime and 25.8% for Secondary premises.
Mike Beresford of CBRE Christchurch says: “The industrial market now appears to be taking a bit of a breather. Industrial tenants have a range of options at present, with the market broadly in equilibrium and rents for Prime space unchanged in Q1. Major transport upgrades including the Southern and Western Corridor state highway projects, as well as the options further west in Rolleston, will drive the performance of this sector over the next few years. With an ample supply of available land, we see construction costs and locational attributes as being the main drivers of future industrial rental growth.”
Tim Wiles of CBRE Research says: “Industrial property performance in Christchurch will continue to reflect the forces of supply and demand. On the supply side, we are seeing a number of developers promoting themselves as ‘good to go’, with key development sites ready to meet occupier demand. Looking forward, industrial rent growth will continue to be driven by rises in underlying construction costs, although with ample industrial land available for development, we don’t see supply as being a major constraint on the immediate horizon.”
About CBRE
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
