"Other new projects in the CBD Queen St area include the refurbishment of the Metro Centre and the redevelopment of the adjoining Bledisloe Lane retail space, which is set for completion in early 2014."
Patel says the strong activity in lower Queen St coincides with news that this June was the busiest month for retail property transactions in Auckland in more than five years.
"The most recent pedestrian count data from the Property Institute show a healthy foot traffic picture, with numbers increasing to multi-years peaks at the lower end of Queen St and at their highest levels since 2009," he says.
"It's been a good five to six years since we've seen activity of this level in Auckland's retail property sector. There was strong activity before the global financial crisis but we certainly haven't seen the market behave like this since at least 2008."
Patel says changes to pedestrian and vehicular traffic mean there are more shoppers on foot, and more people in the downtown area, including in Fort St where the streetscape has been redeveloped to make it more pedestrian friendly.
"Visitors coming off cruise ships are also a significant driver of those big retailers wanting to be located downtown, with retailers gearing up to be able to meet increased foot traffic from these ships.
"The international cruise industry has grown phenomenally over the last 10 to 15 years and Auckland has particularly benefited from that growth. In 1996-97 Auckland saw 27 cruises catering for 19,400 passengers.
However, in the 2012-13 cruise season passenger numbers increased to about 214,000. It's estimated the cruise industry last year (2011-12) generated around $268,000,000 in direct spending into Auckland alone and provided around 1550 jobs. Cruise ship numbers look set to remain high and even increase in coming years, with 89 visits due to occur between the end of August this year and the end of June next year."
Patel says two key infrastructure developments will assist in this expansion. "The redeveloped Shed 10 will be over 50 per cent larger than the current cruise facility on Princes Wharf and is being designed to cater for cruise ships carrying up to 3000 passengers and for events of up to 3000 people."
In addition, he said, Ports of Auckland's project to deepen the northern berth at the Fergusson Container Terminal allows for the simultaneous servicing of two large ships at the terminal which will create space for more cruise ships along the wharf. "The new cruise ship terminal is going to be another asset in an already well-performing area," he said.
Patel says the redevelopment of lower Queen St is also driven by the popularity of the harbour area including the Britomart precinct and pedestrian access to the ferry terminal and Britomart Transport Centre.
"All these factors are having an impact on retail rents," he says. "It's noteworthy that the collective shift towards the bottom of the city isn't necessarily being pushed by retailer capital or the Kiwi economy - it's more about the lack of availability of properties. As a result we are seeing rents being forced up, with lease terms typically six years or more, incentives dropping and core vacancy levels dropping."
Patel says there are also some clear and noteworthy rent distinctions appearing along Queen St: "Between Fort St and Customs St we are seeing rents average between $2500 to $3500 per sq m; from Victoria St down to the eastern end of Fort St we are seeing around $2000 to $2500 per sq m; and from Victoria St to Wellesley St it comes down to $1500-$2000 per sq m."
Patel says the fact international retailers are scoping properties in the CBD, shows that prime retail stock in the city is precious.
"High-end retailers are set to stay at the bottom end of Queen St, and if anything, that situation will only be compounded as other retailers catch on and want to position themselves with the big names and flagship sites. Overall, the outlook for Auckland's retail sector is extremely positive. We've got some great retail opportunities and retailers are prepared to spend the capital on prime opportunities, so we need to ensure we've got the supply of retail stock to meet demand and to ensure that retailers can take advantage of the market.
"We are experiencing 'bidding wars' for various tenancies where multiple retailers are lining up with multiple offers so we are definitely in a landlords' market," Patel says.
