Sky World in Auckland confirms redevelopment still in the works after struggles to sell

Auckland's Sky World has been in a state of limbo for years, with shop closures and uncertainty over its future.

Auckland central retail complex Sky World is still for sale two years after its initial listing, as it looks to seek joint funding to facilitate its previously revealed redevelopment plans.

It was once a grand entertainment hub on Auckland’s central shopping strip but for years the centre that borders Aotea Square has become more and more of a ghost town, with the majority of its available store spaces left empty in a reminder of its faded splendour.

Posters hoping to build excitement for its eventual redevelopment have so far come to nothing.

The centre has faced numerous controversies over its lifetime, from an extended operating period without a warrant of fitness due to fire safety issues, to unfortunate deaths in the early 2000s.

The Herald can reveal lengthy discussions and adjustments with a potential buyer of the building since last year have recently concluded without its sale.

However, the building’s owners JNJ Management have confirmed multiple other buyers are showing interest as ongoing discussions continue after inquiries from the hotel, apartment and shopping centre sectors.

Alongside that process, JNJ has also confirmed it is progressing with plans to redevelop the building, with the renovation valued at an estimated $40 million.

Sky World sits in the heart of the city on Aotea Square, across from the Kiri Te Kanawa Theatre. Valued at more than $50 million, the property's owner is looking to redevelop it for the next generation.

With nine levels comprising approximately 16,000 square metres of total net lettable area, the property is in a prime location.

In early 2023 the building was listed for sale by Colliers, the first sign of movement in years, with the property for sale through an international expression of interest campaign.

The deadline for offers at the time closed on April 27, 2023, but it was not bought.

JNJ Management confirmed the listing hadn’t been fully removed, but the due diligence period had concluded in late 2023 and it “encountered some challenges while negotiating the price”.

Colliers confirmed it was no longer involved with the sale of the property.

According to Auckland Council records, the property has a capital value as of June 2021 of $54m. With revaluations expected by the end of 2024, this value could change.

“Initially, we aimed for a partial renovation and sought funding from the bank,” a JNJ spokesperson said.

“However, the onset of the pandemic resulted in significant interest rate increases, which hindered our ability to proceed with renovations or development.”

‘Vision to transform property’

Sky World’s primary focus over recent years has been on establishing a Starbucks Reserve Centre, an expanded cafe and roastery, and pursuing the OnQ Renovation Project.

Revealed in February 2022 through a leasing proposal, the OnQ Entertainment Centre was set to be a full redevelopment of the building.

JNJ confirmed it had received resource consent for the project and has completed all necessary engineering and architectural work for building consent, but its lodgement is on hold with Auckland Council.

Despite quantity survey analysis completed by JNJ showing an estimated redevelopment value of $35m, this has now grown to at least $40m.

“Our vision is to transform the property into a mixed-use development that includes retail spaces on the lower basement levels, complemented by hotel and apartment units above,” said the spokesperson.

This includes opening up the entrances on Queen St and Bledisloe Lane, making them more accessible and inviting for centre visitors.

The City Rail Link set to open in 2026 includes a stop nearby called Te Waihorotiu Station, just 50 metres from the building’s entrance on Bledisloe Lane, and was expected to become its busiest entrance.

An artist's impression of the potential exterior for the OnQ Entertainment Centre in Auckland's CBD as seen from the Queen St entrance.

Pitched as “Auckland’s new, premiere entertainment precinct” in its proposal, it showed a potential 22 spaces available for lease, with anchor tenants including Event Cinemas, Metrolanes, the Odyssey Sensory Maze and the GameOn Arcade.

Spaces available for lease ranged from 25sq m, likely for a food or beverage provider, to approximately 1700sq m.

The larger space had the potential to be split into two separate tenancies, but the proposal had a preference for one large entertainment provider.

Another significant part of the redevelopment would be the inclusion of large LED panels on the exterior of the building.

One is proposed to wrap around the building’s drum tower, with artist impressions suggesting the removal of its iconic satellite sculpture.

The largest proposed would be installed on the building’s exterior facing Aotea Square, providing a Times Square-esque digital billboard.

An artist's impression of the proposed exterior LED screen that would face Aotea Square as part of the OnQ Entertainment Centre redevelopment.

The Starbucks Reserve project was heavily pursued by JNJ and the company had been in discussions with Starbucks’ New Zealand franchise owners to express their interest.

To facilitate this, JNJ allocated approximately 3500-4000sq m across the building’s first and second levels to accommodate the reserve.

According to JNJ, the discussions with Starbucks lacked consensus and the project was temporarily put on hold to pursue the OnQ renovation.

JNJ confirmed that should further discussions with a potential buyer not yield success, it would either relist the property or reattempt to secure project funding through joint development to facilitate its next phase.

However, it acknowledged a greater likelihood of selling the property rather than pursuing renovations.

The building is owned by James Kwak through his company JNJ Management, the sole owner since 2011.

Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.