What should Auckland retail property buyers look for?
Buying retail property in Auckland often means going up against serious demand, these tips can help you get ahead of the curve.
Despite rising prices across the board, retail space in Auckland remains an appealing option for both businesses and investors.
Data from realestate.co.nz during Q2 2017 indicates that the average asking price for a retail lease was just above $151,000 per annum significantly lower than the overall commercial average of $212,000. The same figure for sales was $1.39 million, also around half the average asking price for all commercial property in Auckland.
While these figures tend to be above national averages, Auckland remains the country's commercial powerhouse and a destination for anyone with an interest in investment. But with nearly 40,000 square metres (sqm) available during Q2 this year, how can investors discern the wheat from the chaff? What should they be looking for when investing in an Auckland retail space?
1. Forward-thinking architecture
Great retail spaces in Auckland need to be forward-thinking, practical and attractive. This all begins with architecture and design, which can elevate even the most unseemly retail space into something every business will want to lease.
As an example, take the Fortieth & Hurstmere market in Takapuna - a winner at the 2016 NZ Architecture Awards. The NZ Institute of Architects (NZIA) called the initial space ‘unprepossessing’, before praising the scaling and materials used (such as concrete flooring and repurposed brick walls), which added ‘depth and diversity’ to a space that was previously attractive to only a select few.
It's the fixer-upper mentality writ large. Even a run-down retail space in Auckland could become something fantastic with the right design - investors seeking a growth opportunity should be looking for the right architect as well as the right commercial property.
2. Long-term yield strength
200sqm. That's the average area of retail spaces for sale in Auckland, based on realestate.co.nz Q2 2017 data. With a total of nearly 40,000sqm listed in the same quarter, that means a huge number of retail premises are available for investors. However, the difficulty lies in finding a space that will provide strong long-term returns.
What makes a great retail property in Auckland?
While retail spaces have above-average affordability per square metre (by Auckland standards), investors still need to ensure their yields remain sturdy for the long-term. Current asking prices for both sale and lease suggest that retail yields are performing well - provided your investment is in the right location.
3. Proximity to the growth hubs
Good retail investments need tenants to have a good business. Without a keen eye on incoming infrastructure projects, this simply can't happen. It is worth examining Auckland Council's "Supporting growth - Delivering transport networks plan" to identify potential growth sites down the line.
Currently, the Council expects 110,000 new homes and 50,000 new jobs in areas like Warkworth and Silverdale in the north; Kumeu and Redhills in the northwest; and Takanini and Pukekohe in the south. Some of the projects slated for delivery are simply guardrail installation, while others will create entire new public transport networks and hubs. These are the projects to watch - where new hubs are created, new opportunities for a retail expansion are opened.
4. Commercial property zoning changes
A Land Information Memorandum (LIM) will tell you everything a local council knows about a specific retail premises. This is important for determining existing zoning requirements, but investors may need to dig a little deeper when buying commercial property in Auckland.
Where are you searching for the next retail investment opportunity?
Zoning changes under the Unitary Plan could affect where you decide to make an investment, so it's worth taking stock of the intended hubs established by new mixed-use areas. This includes significant parts of Newton and Grey Lynn / Arch Hill, as well as long stretches along Great South Road towards Remuera. This is only a handful of proposed changes, but studying the Unitary Plan will give investors a clear picture of where Auckland is set to intensify and grow.
5. Strong tenant history
A commercial investment can be more trouble than it’s worth if there is an unsavoury tenancy history. How often do new businesses take on the lease? Have there been disputes in the past? Were past issues due to the lessors or the landlord?
A strong retail investment should be a well-oiled machine, in terms of both finances and business relationships. Disputes and tenancy issues can lead to costly mediation and even loss of income.
Finding the perfect retail space in Auckland is a near-impossible task, with demand so high for prime commercial properties in the CBD. However, there are still plenty of opportunities - and you'll find them in our listings.