Christchurch’s reinvigorated CBD is the envy of Auckland and Wellington as retailers and office tenants vie for quality stock in premium inner-city locations.
These are among the key findings of the latest annual Colliers property survey, presented by Marius Ogg and Scott Ansley of Colliers Christchurch at the Property Council New Zealand’s recent Christchurch Market Summit.
“The CBD is in an extremely strong position despite the wider retail challenges. We’re in a ‘romance’ period with not enough space to meet demand. It’s a CBD like we’ve never known before,” Ogg says.
Vacancy rates in the retail precinct have dropped to their lowest level yet at just 5.7 per cent compared with 23.2 per cent back in 2018. Cashel Street is in the highest demand, followed by High and Colombo streets.
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Ogg says continuing demand is fuelling rental increases with the potential that tenants may need to pay ‘key money’ to secure a prime spot.
“Earlier this year there were multiple offers on a tenancy, which was pretty much unheard of previously.”
In the CBD office market, there’s been a minor shuffling of the deck with a notable flight to quality space in the core and West End where vacancy is limited, particularly of scale, Ansley says.
Overall CBD office vacancy is at 8.3 per cent, a long way from the peak in 2016 of 23.9 per cent. There are currently six new office builds under construction in the CBD, six are being refurbished, and three are being planned.
He says the new supply line will bring a changing but exciting dynamic.
At the completion of the current phase of new builds, refurbishments, and proposals, the central city office market will return to the equivalent pre-earthquake size, Ansley says.
“We think the CBD core will likely stabilise in terms of rent and vacancy, but lower-quality space in the peripheries of the central city and in the suburbs will face leasing challenges.
“It’s clear that Christchurch’s CBD is not suffering from the same impact post-Covid as Auckland and Wellington.
“There are several Christchurch specific factors. We have a new CBD, we haven’t suffered from the same work from home influence as other centres, our new convention centre is bringing people in, the stadium is making good progress, and the metro sports facility will be a great addition when completed. It augurs well for our city,” Ansley says.
Meanwhile, industrial land supply is constrained and tipped to remain so, fuelling increased land values by up to 50 per cent since Covid. While there is some increased vacancy of industrial buildings, it is still low by historic measures.
Industrial properties dominated investment sales with a top price of more than $60 million in Rolleston and others weighing in at more than $40 million, $23 million, and $18 million.
Ogg believes the property cycle has bottomed out and the start of the recovery is nigh, buoyed by easing inflation, declining interest rates, population growth, returning investor confidence, and the return of tourists and overseas students.
- Supplied by Colliers
