Colliers Portfolio | Issue 2 2024

Licensed REAA 2008

Colliers Portfolio Issue 2

Unit B, 111 Lincoln Road, Henderson, Auckland More on page 4

Accelerating success.

May

2024

Recent Deals SOLD

2 Colliers Portfolio

71/72 The Mall, Cromwell, Central Otago Sold by Rory O'Donnell and Steve McIsaac

SOLD

12 Selwyn Road, Manurewa, Auckland Sold by Gawan Bakshi, Rijak Bakshi and Kris Ongley

LEASED

21-27 Pereita Drive, Rolleston, Canterbury Leased by Sam Staite

SOLD

9 Hobart Street, Queenstown, Otago Sold by Alastair Wood, Tim Thomas, and Richie Heap

LEASED

35 Hudson Road, Bell Block, New Plymouth Leased by Benet Carroll

LEASED

92-107 Magdala Place, Middleton, Christchurch Leased by Sam Staite and Paul Marshall

SOLD

6 Bush Creek Road, Arrowtown, Otago Sold by Mary-Jo Hudson and Rory O'Donnell

SOLD

143 Newton Street, Mount Maunganui, Bay of Plenty Sold by Rachel Emerson, Rob Schoeser and Simon Clark

SOLD

3 Bond Place, Invercargill Sold by James Valentine and Dean Collins

Contents

Did you know?

Colliers Portfolio Issue 2 2024 04

06

Premium high-profile office in West Auckland

Hobsonville childcare centre

07

13

14

17

Colliers New Zealand April Research Report

Colliers Commercial Office H1 Research

Featured Brokers

Take Colliers Portfolio on the go with you, by scanning the QR code below.

Welcome to the second edition of Colliers Portfolio for 2024.

Autumn is upon us and while we have lost the late evening sun and the days are feeling colder, there is still cause for optimism in the commercial property sector.

Recent sales success across the country proves buyers are prepared to spend money and our brokerage experts are gaining a stronger sense of current market values.

A stabilised OCR, which has remained at 5.5 per cent for nearly a year, has helped bring certainty to the market as buyers can make offers knowing their cost of capital should remain neutral or potentially even fall in the short-to-medium term.

During the past 12 to 18 months, vendors have seen a readjustment of property values due to the changing economic circumstances and they are prepared to acknowledge valuations have softened.

Recent conversations we have had with the banking sector suggest they are ‘open for business’ and have shown a renewed willingness to engage and support buyer demand for commercial property.

Owner-occupiers remain a prominent buyer group in our market but investors, both passive and add-value, are reemerging, indicating a renewed sense of confidence and an intention to get back in the market in 2024.

Our latest edition of Portfolio includes assets from across New Zealand, including industrial properties throughout Auckland that will complement compelling offerings in Christchurch and Tauranga.

Thank you for your continued interest in Colliers Portfolio, our national sales team looks forward to speaking with you about your property requirements.

David Burley Auckland Director | Investment Sales

Colliers Portfolio

3

Key Listings

Colliers Portfolio is online.

4 Colliers Portfolio

Premium High-Profile Office 1,113 sq m For Sale/Lease B/111 Lincoln Road, Henderson

For Sale/For Lease closing Wednesday 22nd May 2024 at 4pm

1,113 sq m

21 carparks

Prime road front position

Single level floor plate

Upcoming Vacant Possession

Established neighbours

Situated prominently on the road frontage of the Lincoln Centre at 111B Lincoln Road, this property is at the gateway of the complex that is home to The Warehouse, Spotlight, Nood and Noel Leeming amongst other well known brands. At 1,113m² this office space, which is predominantly on the first floor, offers a huge open floor plate with excellent natural light and high ceilings. In addition to the mainly open plan area there are a number of useful meeting rooms and shower facilities. The property is currently leased to ACC until February 2025 and timing for its next occupant is available by negotiation. Owner Occupiers and investors should definitely inspect, viewings strictly by appointment only.

Caroline Cornish 021 390 759

Benson Tarm 021 536 861

colliers.co.nz/p-NZL67028402

News

A highly visible office building in a sought-after location in West Auckland is being presented to the market with vacant possession and will draw interest among tenants, owner-occupiers, and investors.

“Meanwhile, investors may tenant the building with a new occupant. Market estimates from Colliers suggest the annual rental income from the property could be approximately $315,000 plus GST and operating expenses.”

Unit B, 111 Lincoln Road, Henderson has 1,113sq m of total net lettable area and the stratum in freehold property is zoned Business – General Business Zone under the Auckland Unitary Plan.

The accessibility to West Auckland and the subject property has greatly improved in recent years due to the enhancement of the surrounding motorway network.

There are also a range of bus services that run through Lincoln Road.

The property is currently tenanted by ACC until 28 February 2025, but could be available with vacant possession at the end of June.

With its prime road front position, the property benefits from significant exposure to one of the key arterial routes in West Auckland. In addition to the common car parks in the Lincoln Centre there are also 21 dedicated car parks on the title, providing convenience for the occupants.

The office is part of a larger shopping centre and sits near well-established national businesses such as The Warehouse, Spotlight, Nood, and Noel Leeming. Alongside these prominent retailers, Lincoln Road is also home to an extensive number of food and beverage outlets.

Colliers Brokers Benson Tarm and Caroline Cornish have been exclusively appointed to market the property for sale or lease via deadline private treaty closing at 4pm on Wednesday 22 May, unless sold prior.

Originally constructed in 1998, the property comprises a ground floor entrance and lobby leading up to the large first floor office that includes a reception and several individual meeting rooms. The large single floor plate provides a platform for seamless business flow.

Tarm, Investment Sales Broker at Colliers, says the opportunity to acquire this office building with vacant possession means prospective purchasers will have a range of options.

“Owner-occupiers will covet the opportunity to acquire the property and begin trading quickly, all while being in control of their own destiny by not being bound to a lease agreement,” Tarm says.

The Waterview Tunnel has substantially reduced travel times and improved connectivity to the Auckland Airport.

West Auckland is a rapidly growing area featuring numerous housing developments with suburbs such as Westgate and Hobsonville benefiting.

The Henderson-Massey Local Board area’s total population in 2023 was 131,400, according to data from Infometrics, up 2.3 per cent from the year prior, a growth rate that outpaced the national figure of 2.1 per cent.

Cornish, Director of Investment Sales at Colliers, says this population growth has contributed to a growing demand for services and business development in West Auckland.

“The NorthWest Shopping Centre can be reached in approximately 10 minutes from the subject property, while New Zealand’s first Costco opened in West Auckland in 2022 in a nod to the potential of this fast-growing locality,” Cornish says.

“Further information from Infometrics notes the average growth of business units in the Henderson-Massey area during the past 10 years is 3.6 per cent, larger than the national figure of 2.3 per cent.

“Having the opportunity to secure a highly functional office building surrounded by such a complementary mix of amenities is something that is seldom seen in West Auckland, and we encourage all interested parties to contact us to explore their options.”

Colliers Portfolio

5

Key office location in West Auckland

6 Colliers Portfolio

New 15-Year lease + Bank Guarantee 327KK Hobsonville Road, Auckland For Sale by Deadline Private Treaty closing 4pm on Wednesday 22nd May 2024 (unless sold prior)

Market-leading tenant

Returning $405,600 pa + GST

Six-month bank guarantee

Fifteen-year lease

Strong rental growth

3,508 sq m land

Elevate your portfolio with the unparalleled opportunity offered at 327KK Hobsonville Road. Colliers are proud to present this excellent investment property shines across all categories – long lease, passive income, bank guarantee, rental growth, quality building, substantial land and more.

The modern childcare centre is offered to market with a brand-new 15-year lease returning $405,600 pa + gst. The lease is backed with a 6-month bank guarantee and tenanted by Real Kids Early Learning Centre. Significant value in the property is underpinned in the substantial land zoned Residential Mixed Housing Urban providing investors long-term development potential in fast growing Hobsonville.

Ronal Prasad 021 232 1192

Shoneet Chand 021 400 765

colliers.co.nz/p-NZL67028485

Modern Aged Care Facility With Long Term Lease Prime asset with room to grow 32 Taui Street, Ngongotahā

Land area: 13,355 sq m

Building area: 3,511 sq m

Consented for 81 residents

Simon Clark +64 21 959 710

12-year lease from Oct 2017

Net rental: $810,397 + GST

Lake views & frontage

Mark Rendell +64 27 225 6275

colliers.co.nz/p-NZL67028246

Secure medical investment - 10 year leases Substantial modern buildings 170 Ōmokoroa Road, Ōmokoroa

For Sale by Deadline Private Treaty closing 2nd May 2024 at 4pm (unless sold prior)

Land area: 4,497 sq m

Simon Clark +64 21 959 710

66 on-site car parks

Net rental: $387,372 +GST

High-growth location

Rich Davidson 027 860 9338

colliers.co.nz/p-NZL67027727

Medical tenants

Wide road frontage

Colliers Portfolio

7

For Sale by Deadline Private Treaty closing 9th May 2024 at 4pm (unless sold prior)

Anchored by Selwyn District Council & Harcourts

58 Tennyson Street | Building I | Rolleston Fields, Selwyn For Sale offers over $7,900,000 + GST (if any) 8 Colliers Portfolio

Freehold title

Land area 903 sq m

Floor area 1,081 sq m

Strong tenant covenants

Brand new construction

Fixed annual growth

Courtney Doig 021 991 251 colliers.co.nz/p-NZL67028449

Boundary lines indicative only

Global Tenant on Prime Corner Site 156-162 Great South Road & 4 Taka Street, Takanini For Sale by Deadline Private Treaty closing 4pm 22nd May 2024 (unless sold prior)

5,260 sq m Strategic Corner Site

Gawan Bakshi 021 31 31 48

Publicly Listed Global Tenant

Returning Net $218,000 + GST

Rijak Bakshi 021 31 31 81

colliers.co.nz/p-NZL67028503

5-Year Lease From August 2023

Ready Access (200m) to Public Transport

Stipulated Rental Growth Throughout the Lease Term

Boundary lines indicative only

Unlock the Upside

4-6 Akatea Road, Glendene

161 Dominion Road, Papakura

For Sale by Deadline Private Treaty closing Thursday 16th May 2024 at 4pm (unless sold prior)

For Sale by Deadline Private Treaty closing Wednesday 29th May 2024 at 4pm (unless sold prior)

New 5-year lease

4,016 sq m freehold site

1,243 sq m building

Paul Jarvie 021 337 419

James Dickey 021 026 81093

9

Prime Industrial Asset

Returning $520,000 p.a.

Nelson Raines 021 555 673

Add-value, invest or occupy Colliers Portfolio

Dhiru Patel 021 340 780

Buy one or both

Greg Goldfinch 021 537 682

Josh Franklin 021 990 714

colliers.co.nz/p-NZL67028164

colliers.co.nz/p-NZL67028350

Boundary lines indicative only

Add-value opportunity

11,267 sq m Patiki Road Yard

81 Riccarton Road, Riccarton, Christchurch

75 Patiki Road, Avondale

For Sale by Negotiation

Quality tenant mix

High-yielding opportunity

Owner-occupier potential

For Sale by Deadline Private Treaty closing Tue 28th May 2024 at 4pm (unless sold prior)

Occupy, Invest $500k+ Holding or Develop Income

190m Motorway Frontage

Will Franks 027 250 0130

Shoneet Chand 021 400 765

Mark Macauley 021 650 460

Matt Prentice 021 464 904

colliers.co.nz/p-NZL67028416

colliers.co.nz/p-NZL67028436

327KK Hobsonville Road, Hobsonville, Auckland Elevate your portfolio with the unparalleled opportunity offered at 327KK Hobsonville Road.

Colliers are proud to present this excellent investment property that shines across all categories.

Details on page 6

Boundary lines indicative only

Boundary lines indicative only

Occupy or Develop in Ponsonby

Prime Development Opportunity

14 Saint Marys Road, Auckland

581 Mt Eden Road, Mt Eden, Auckland

For Sale via Auction to be held 11am, Wednesday 29th May (unless sold prior)

For Sale by Deadline Private Treaty, closing 2pm Tuesday 21st May 2024 (unless sold prior).

12

Z Boutique Character Space

Colliers Portfolio

Harbour View Development Potential

Ned Gow 021 122 2731

319 sq m land & 126 sq m floor area

Ben Jamieson 021 520 884

colliers.co.nz/p-nzl67028544

Holding Income

Residential Mixed Housing Urban zone

Fee Simple 1,457 sq m site (approx.)

Ben Jamieson 021 520 884

Gawan Bakshi 021 31 31 48

David Burley 021 478 225

colliers.co.nz/p-nzl67028548

Auckland CBD Port of Auckland

Boundary lines indicative only Orakei Domain

K

e

p

a

Boundary lines indicative only

R

o

a

d

Strategically Positioned Vacant CBD

Breathtaking Consented Development

10C, 17 Albert Street, Auckland Central

182-184 Kepa Road & 8 Kurahaupo Street Ōrākei Auckland

For Sale by Deadline Private Treaty, closing 4pm Thursday 30th May 2024 (unless sold prior)

Approx. 98 sq m Owner-occupier lettable area opportunity

Attractive CBD views

Ross Hinshelwood 021 1553 435 Tony Allsop 021 959 154

colliers.co.nz/p-nzl67028481

For Sale by Deadline Private Treaty, closing 4pm Wednesday 22nd May 2024 (unless sold prior).

Significant Resource Consent

Elevated 2,251 sq m site with Panoramic Views

David Burley 021 478 225

Kris Ongley 021 657 687

THAB & Business Mixed Use Zone

Logan Roach 027 358 9383

colliers.co.nz/p-NZL67028491

Our People

Benson Tarm Broker | Auckland West M: +64 21 536 861 | E: Benson.Tarm@colliers.com Since Benson's transition into brokerage he has successfully sold multiple properties ranging from retail and offices to industrial assets and transacted over 60 leases within 24 months in the West Auckland area.

Caroline Cornish Director | Auckland West M: +64 21 390 759 | E: Caroline.Cornish@colliers.com Based in West Auckland, Caroline is a commercial broker specialising in sales, leasing and investment sale properties.

Shoneet Chand Director | Auckland North M: +64 21 400 765 | E: Shoneet.Chand@colliers.com Shoneet has been involved in selling investment property for over 15 years and is a Director at Colliers, specialising in Investment and Development Sales across the wider Auckland region.

Ronal Prasad Broker | Auckland South M: +64 21 232 1192 | E: Ronal.Prasad@colliers.com Ronal has established himself as a trusted and knowledgeable broker in the industry with his in-depth understanding of the commercial property market. In the last 12 months, Ronal has been involved in over $80m worth of commercial property sales nationwide.

Simon Clark Managing Director | Tauranga M: +64 21 959 710 | E: Simon.Clark@colliers.com Simon is the managing director of the Colliers Tauranga office. With over 28 years in the industry, he is the most experienced and successful commercial broker in the region.

Colliers Portfolio

13

Featured Colliers Portfolio Brokers

Research

New Zealand Research Report | April 2024 14 Auckland, the favoured investment destination

Sales data tracked by Colliers Research shows the value of commercial and industrial property sales nationally to have totalled $5.21 billion in 2023, the lowest annual figure recorded in a decade. Given the time lag in the reporting of sales, the final figure is still provisional, so will likely rise but will remain significantly below the 10-year average of $9.33 billion.

The volume of sales also fell to a multi-year low, with the provisional data showing just under 2,500 transactions taking place over the year, down by 23% from the 2022 total.

Industrial sector leads the way While not immune to the general slowdown in sales activity, the industrial sector’s share of overall sales, by value, continued to increase in 2023, illustrating the strong appeal of the asset class. The total value of sales over the course of 2023 sits at a provisional value of $2.81 billion, a figure which is likely to increase to over $3 billion when figures are finalised.

The sector’s share of overall market activity, by value, has been trending upwards over recent years. Over the course of 2023, industrial property sales equated to 54% of the national total, the highest annual proportion recorded.

Industrial

Retail

Sales Count

7,000

$14,000

6,000

$12,000

5,000

$10,000

4,000

$8,000

3,000

$6,000 $4,000

2,000

$2,000

1,000

$0

Source: Colliers Research, CoreLogic

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

0

Sales Count

Commercial Mixed & Vacant Land

2023 Commercial & Industrial Sales Value by Region Commercial Mixed & Vacant Land

Industrial

Retail

$2,500 $2,000 $1,500 $1,000 $500 $0 Auckland

Canterbury

Wellington

WaikatoB

ay of Plenty

Rest of N.I.

Rest of S.I.

Source: Colliers Research, CoreLogic

Canterbury secured second place, narrowly surpassing the Wellington region. The South Island’s largest market generated sales totalling just over $775 million, equating to 15% of the New Zealand total. However, the region accounted for 20% of the sales volume.

Sales in the Wellington region totalled approximately $675 million annually, with the office sector leading by comprising 43% of the regional total. On a national basis, this equated to 13% of the annual total value and just under 9% of transactions by number.

A lift in activity anticipated for 2024

National Commercial & Industrial Sales Values $16,000

Investment activity in 2023 was heavily skewed towards Auckland, with the region generating sales totalling just under $2.3 billion, accounting for 44% of the national total. In terms of turnover, the region represented 29% of the annual sales count, just below the decade-long average of 33%.

Sales Value (Millions)

The number of commercial and industrial property sales was subdued in 2023, as both vendors and purchasers adopted a cautious approach after a record-breaking couple of years.

Uncertainty regarding the level at which interest rates would peak, given the inflationary backdrop, and concerns about a cooling economy, all weighed upon sentiment surrounding the property market.

Sales Value (Millions)

Colliers Portfolio

A subdued 2023, but lift in 2024 underway for commercial and industrial sales activity

A number of recent data releases give a strong indication that current interest rate settings are having the impact desired by the Reserve Bank of New Zealand.

The economy has slowed, and inflation is easing.

Therefore, there is growing confidence that interest rates have now peaked, and the RBNZ will begin an easing cycle in the second half of 2024 or early 2025.

Consequently, the property market is likely to enter a new growth phase, with sales activity rebounding from the subdued levels apparent over 2023.

15 assets to market. This latter trend is already becoming apparent with the launch of a marketing campaign for G.I.C’s share of the Westfield NZ portfolio.

With both property owners and investors able to value assets with greater confidence, the gap between buyer and seller expectations will reduce. Buyer interest, which in 2023 was generally restricted to safe haven assets, will broaden as investor confidence grows, leading to an increase in sales volume. There will also be less reluctance from property owners to bring significant

New Zealand Key Economic Indicators – April 2024 Dec 23 Sep 23 (vs previous (vs previous quarter) quarter)

March Quarter

Q-o-Q Change

Dec 23 vs Dec 22

Dec 22 vs Dec 21

Y-o-Y Change

2025F

2026F

2027F

GDP

-0.1%-

0.3%

0.2%

0.6%

2.4%

-1.8%1

.6%2

.9%3

.0%

Current Account (% of GDP)-

6.9%

-7.4%0

.5%-

6.9%

-8.8%1

.9%-

4.2%

-3.2%-

2.4%

Dec 23

Sep 23

Q-o-Q Change

Average Dec 23

Year to Dec 22

Y-o-Y Change

2054F

2026F

2027F 2.0%

0.5%

5.6%

-5.1%4

.7%7

.2%-

2.5%

3.9%

1.9%

Net Migration Gain (000’s)

24

34

-10.2

132

25

106.98

17

16

6

Nominal Core Retail Sales

-1.5%1

.0%-

2.5%

3.4%

7.5%

-4.0%3

.2%4

.3%4

.5%

Unemployment Rate (%)4

.0

3.90

.1

4.03

.4

0.65

.1%5

.4%5

.4%

Jan 24

Dec 23

M-o-M Change

Jan 23 (yr rate)

Y-o-Y Change

10 Year Average

2025F

2026F

2027F

21.7%

14.8%

-92,442

6552.6%

58,129

1.1%

1.4%

1.7%

2.0%

Feb 24

Jan 24

M-o-M Change

Feb 23 (yr rate)

Y-o-Y Change

10 Year Average

2025F

2026F

2027F

Floating Mortgage Rate8

.63%

8.63%

0 bps

7.9%

72 bps

6.0%

8.5%

7.5%

7.3%

3 Year Fixed Housing Rate7

.12%

7.18%

-6 bps

7.0%

17 bps

5.4%

NA

NA

NA

Mar 24

Feb 24

M-o-M Change

Mar 23

Y-o-Y Change

10 Year Average

2025F

2026F

2027F

5.50%

5.50%

0 bps

4.8%

75 bps

1.99%

4.00%

4.00%

4.00%

Tourist Numbers Growth

86.4

94.5-

9%

77.7

11%

110.88

.48%

7.47%

7.27%

90 Day Bank Bill Rate5

.64%

5.64%

0 bps

5.2%

41 bps

2.2%

5.77%

4.89%

4.77%

10 Year Government Bond

5.34%

4.59%

4.77%

-18 bps

4.2%

39 bps

2.9%

5.64%

5.44%

NZD vs: US0

.600

.61-

2%

0.63

-5%0

.730

.650

.650

.65

UK0

.470

.48-

1%

0.51

-6%0

.510

.420

.420

.42

Australia0

.920

.94-

2%

0.93

-2%0

.910

.850

.850

.85

Source: Colliers Research, NZIER

Colliers Portfolio

The stabilisation in interest rates and prospects of an easing in monetary policy will result in the removal of some major obstacles that have hampered sales activity over the last year.

Research

Colliers Wellington CBD Office H1 2024 16 Colliers Portfolio

The addition of new prime grade stock and the return of premises following the completion of earthquake strengthening projects, led to an increase in vacancy rates rise over the second half of 2023. As of December, the overall vacancy rate stood at 7.4%, up from the 5.6% recorded in June 2023. The increase has been driven primarily by tenants moving to higher grade space, resulting in secondary grade vacancy rates rising to 9.0% from the 6.8% recorded in June. Leasing options within the primary sector of the market remain limited, with vacancy sitting at 2.0% little changed over the second half of the year.

Total office supply increased to 1.375 million sq m in December, with the addition of prime grade stock outpacing the removal of secondary grade space. Following completions in 2023, the delivery of new product is set to slow. Major projects currently in the pipeline include the new National Archive Centre and 61Molesworth Street, which will house MFAT. While development costs act as a significant constraint, the continued demand for prime quality space will likely trigger further development in the near future.

Upward pressure on rental rates has been maintained, driven by tight market conditions, the introduction of new stock, and an inflationary environment that is feeding through to higher operating costs. Average prime grade gross face rentals have risen to $707 per sq m. Rentals for better quality B grade space have also continued their upward trend, reflecting the lack of prime quality leasing options, with average gross face rentals now standing at $459 per sq m.

Transactional evidence has been limited throughout the year, but higher interest rates have prompted a recalibration of yields.

Growing confidence in the belief that interest rates have now peaked is likely to limit further adjustments and lead to a lift in sales activity over the course of 2024.

AVERAGE NET FACE RENTS ($/SQ M) Prime Secondary L $631

H $701

AVERAGE YIELDS Prime L 6.0%

H 6.9%

L $350

H $426

Secondary L 7.5%

H 8.3%

AVERAGE NET CAPITAL VALUES* ($/SQ M) Prime Secondary L $9,409

H $11,910

VACANCY RATES Prime 2.0%

L $4,312

H $5,782

Secondary 9.0%

SUPPLY Under Construction

Consented

44,450 SQ M

4,753 SQ M

Annual change Data based on December 2023. Face rents, yields and capital values are based on averages across all precincts. Financial figures exclude buildings in the development pipeline.

Research

17

Colliers Auckland CBD Office H1 2024

The CBD’s total inventory increased over 2023 to reach just over 1.438 M sq m. The removal of secondary-grade stock has been outpaced by the introduction of just under 20,000 sq m of prime grade space. This sector of the market now comprises 49% of the CBD’s total stock. While the construction industry overall is projected to decline, and some projects have been put on hold for now, approximately 89,773 sq m of CBD space is under construction, with an additional 23,790 under refurbishment and projected to complete within the next five years.

Demand for prime quality space, the introduction of new supply and an inflationary economic backdrop maintained upward pressure on rentals over the course of 2023.

Average net face prime rentals now stand at around $540 per sq m. Incentives for office space are easing from recent highs due to the lift in leasing activity, however, the range remains broad and is assessed on a case-bycase basis While transactional evidence remains limited, incremental adjustments to yields continue to be recorded. Average prime-grade yields ended 2023 at approximately 6.4%. The rate of softening slowed over the second half of the year as interest rates stabilised.With interest rates now at, or close to, their cyclical peak further movement is likely to be limited over the course of 2024.

AVERAGE NET FACE RENTS ($/SQ M) Prime Secondary L $449

H $597

AVERAGE YIELDS Prime L 5.9%

H 7.1%

L $254

H $328

Secondary L 7.5%

H 8.8%

AVERAGE NET CAPITAL VALUES* ($/SQ M) Prime Secondary L $6,449

H $10,322

VACANCY RATES Prime 6.8%

L $2,932

H $4,477

Secondary 17.4%

SUPPLY Under Construction

Consented

89,770 SQ M

82,995 SQ M

Annual change Data based on December 2023. Face rents, yields and capital values are based on averages across all precincts. Financial figures exclude buildings in the development pipeline.

Colliers Portfolio

Vacancy declined for the second successive survey, bringing the figure to 12.2%. Vacancy is now at its lowest level since December 2021.

The decline has, again, been driven by demand for prime grade space, with vacancy in this sector falling to 6.8% from the 8.0% recorded in June 2023. The bifurcation in the demand for prime versus secondary office space continues, most notably for the highest quality space.

Premium-grade vacancy is at 0.3%, the lowest since mid-2018, and well down from the 6.2% recorded in late 2020.

Research

Colliers Wellington CBD Retail H1 2024 18 Colliers Portfolio

Results of the latest Wellington CBD vacancy survey reflect the challenging conditions within which retailers are currently operating. Overall vacancy in December 2023 sat at 7.5% up from the June 2023 reading of 5.75%. Given the relatively small size of the CBD’s retail inventory, survey results can be quite volatile. Over the last decade, overall vacancy has varied between 4.1% and 9.8% with an average figure of 7.1%. Over the second half of 2023 increases in vacancy were recorded in all precincts with the exception of Courtney Place and Cuba Street. The opening quarter of 2024 has seen the opening of three new tenancies within the ex David Jones building where international brands, Tommy Hilfiger and Calvin Klein have been joined by local retailer AS Colour.

The completion of the Willis Lane restaurant and entertainmentcomplex was the most significant addition to supply in the second half of 2023.

The complex hosts 16 tenancies. The CBD’s development pipeline is unsurprisingly subdued, with upcomingnew supply predominantly coming from mixed-use refurbishment / earthquake strengthening programmes. Amongst these the Reading cinema project, located in the Courtenay Lane precinct, has the potential to have a significant impact.

AVERAGE NET FACE RENTS ($/SQ M) Prime Regional Centre L

H $1,440

$1,036

L $705

H $1,455

L 7.5%

H 8.5%

AVERAGE YIELDS Prime CBD L 6.3%

H 7.3%

AVERAGE NET CAPITAL VALUES* ($/SQ M) Prime Regional Centre L $14,585

H $23,240

VACANCY RATES CBD Overall 7.5%

L $8,295

H $19,400

Lambton Quay 9.9%

SUPPLY CBD rentals stabilised over the second half of 2023, Under Construction Consented with average gross prime grade face rents holding 0 SQ M 5,761 SQ M at $1,238 per sq m. Rents are forecast to remain steady over the first half of 2024, however, costs Annual change are set to rise as outgoings, particularly insurance Data based on December 2023. Face rents, yields and capital values are costs, increase.

Transactional evidence was limited over 2023, however, the higher interest rate environment has led to a recalibration in yields. Investors remain cautious assessing each asset on its merits. Prime grade yields range between 5.9% and 7.5%. Further increases in yield rates are possible in the first half of 2024, however, with a transition to an interest rate easing cycle tipped for late 2024 or early 2025, such movements are likely to be incremental.

based on averages across all precincts. Financial figures exclude buildings in the development pipeline.

Research

19

Colliers Auckland CBD Retail H1 2024

There have been no significant additions to the development pipeline in recent months. The largest schemes currently under construction are Auckland Airport’s premium outlet shopping centre, Mānawa Bay, which is due to open in late 2024, and IKEA’s first NZ store, which is expected to begin trading in late 2025.

Upward pressure on rentals is becoming apparent as vacancy rates decline. However, rates of increase vary widely between various sub-sectors and locations. Higher-quality, wellpositioned premises are achieving the highest growth rates. Operating expenses are rising due to inflation, resulting in additional costs for owners and occupiers. Incentives continue to remain high, with rent and fit-out cost incentives available, especially if vacancy has been persistent.

Sales activity remained subdued over the second half of 2023. However, with occupier fundamentals improving as lower vacancy rates put upward pressure on rentals a lift in activity is anticipated as 2024 progresses. While limited, sales evidence indicates that yields are stabilising as confidence grows in the view that interest rates have peaked. Evidence of the level at which yields for premium grade premises stand is likely to emerge following the marketing of GIC’s share in the Westfield NZ portfolio.

AVERAGE NET FACE RENTS ($/SQ M) Prime CBD Regional Centre L $800

H $5,000

AVERAGE YIELDS Prime CBD L 5.3%

H 7.3%

L $550

H $1,800

Regional Centre L 6.0%

H 8.0%

AVERAGE NET CAPITAL VALUES* ($/SQ M) Prime CBD Regional Centre L $11,035

H $95,240

VACANCY RATES CBD Strip 10.4%

L $6,250

H $30,000

Regional Centre ** 2.2%

SUPPLY Under Construction

Consented

58,000 SQ M

143,717 SQ M

Annual change Data based on December 2023. Face rents, yields and capital values are based on averages across all precincts. Financial figures exclude buildings in the development pipeline. **Based on average vacancy rates of shopping centres in Central, North, South, East and West.

Access the latest Colliers' research at colliers.co.nz/research

Colliers Portfolio

Overall vacancy across Auckland’s retail precincts declined again in the second half of 2023, standing at 3.8%, down from the 5.8% recorded in June. The CBD’s recovery also continued with vacancy declining to 10.4% from the peak level of 14.4% recorded in late 2021. The current figure, however, remains well above the pre- Covid 10year average of 2.8%. CBD Arcade vacancy rates remain stubbornly high as retailers focus on position and exposure. Suburban strip vacancy has decreased from 10.1% in June 2023 to 6.6% as of December 2023.

Licensed REAA 2008 HSBC Tower, Level 23 188 Quay Street Auckland 1010 portfolio.colliers.co.nz About Colliers Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 66 countries, our 19,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 29 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders. With annual revenues of $4.3 billion and $98 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors and our people.

Legal Disclaimer This document/email has been prepared by Colliers for advertising and general information only. Colliers makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers and /or its licensor(s). © 2024. All rights reserved. This communication is not intended to cause or induce breach of an existing listing agreement. Colliers New Zealand Limited (Licensed REAA 2008).

May 2024

Accelerating success.