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Bayleys Research


NEW ZEALAND RETAIL 2010

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RETAIL GROWTH SLOW BUT MAJOR OWNERS LOOK TO FUTURE

New Zealand’s retail sector remains under pressure as consumers continue to prioritise savings and debt reduction over spending on discretionary items. While the latest retail sales statistics released by Statistics New Zealand (Stats NZ), for September 2010, show sales to be 2.9% up on a year earlier the total figure is below that of July.

Given the high degree of uncertainty that exists in the economy at present it seems likely that recent stagnant spending trends will continue for a number of months yet. While the latest figures reflect a surge in late September, electronic card sale data shows spending up by nearly $36 million compared with last year, this was primarily a reaction to the fact that GST was to increase on 1st October 2010. The GST rise is one of a raft of changes to the national taxation system to come into effect this year and it is likely that households will take some time to fully understand the implications on household incomes.

The impact of the cool economic environment is reflected in the findings of the latest Bayleys Research national retail survey which has identified a number of trends common throughout the regions. Unsurprisingly the survey has found that retail rental levels are under pressure as tenants approach landlords with requests for assistance as they attempt to trade through the extended period of weak consumer demand. The result has seen rental holidays and the suspension of rent reviews becoming more common as landlords recognise the importance of tenant retention in a market where leasing activity is weak.

The economic downturn has accentuated the divide between prime and secondary pitches. The Bayleys Research survey found that while, in most regional centres, prime pitches have experienced only minor changes in vacancy levels, thereby limiting the impact on rental levels, secondary locations and poorer quality buildings have suffered increasing vacancy with consequent downward pressure on rentals.

In a number of regional centres the rare appearance of vacancies within prime retail areas has provided an opportunity for national brands to gain entry where previously local traders had dominated, with a particularly good example being Gisborne. The entry of the national brands has helped to shore up rental values, which has led, in some cases, to smaller independent traders having to relocate to more affordable locations.

Bulk retail development has remained popular, with this sector of the market generally holding up as a result of the fact that a majority of the occupiers are national or international brands. The expansion of the sector is still unpopular with a number of city councils around the country though as they try to balance shopper demand with a desire to maintain vibrancy within traditional city centre retail precincts.

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