Counter punch

Counter punch

Total Property - Issue 3 2019

Doomsayers have long been talking down physical retail in the face of growing online trade, yet New Zealand is not seeing the drastic shifts in retail space that pessimists were forecasting.

Industry analysts Rider Levett Bucknall report that demand for new retail outlets was the top driver of growth in non-residential construction demand over the past year.

Retail management software leader Vend say that if they provide compelling experiences, bricks-and-mortar stores will succeed because of, not despite, new technology.

A Knight Frank report says big-box supermarkets remain the core grocery sales channel in the UK, accounting for 80 percent of profits.

Retail analyst Chris Wilkinson recently said successful retail strips will have “differentiated retail offerings with a good diversity of brands, a clustering of like-categories, a good mix of food and beverage, ease of accessibility, consistency in hours and strong amenity value”.

New Zealand’s largest shopping centre, Sylvia Park in Auckland, is the flagship retail precinct for Kiwi Property Group and accounts for almost a third of its $3 billion-plus portfolio.

Linda Trainer, Kiwi’s general manager asset management, says creating an experience-centred and adaptable precinct has allowed it to thrive.

“Not long ago, a typical New Zealand customer spent hours in a store searching out the latest CDs and DVDs and took rolls of film to be developed by the local photo lab.

“Today, we’re a more digitally-connected society and in response, products susceptible to changes in technology have gradually disappeared.

“They’re replaced with products, services and experiences that can’t be replicated online, such as great in-store fashion experiences, food, entertainment and personal services.”

Creating a responsive precinct requires mastering the tenant mix.

“We have a staple offer of majors and mini-majors to anchor the centre, which helps drive traffic to our specialty store retailers.”

More dining and entertainment options have been added to increase the destination appeal.

Up to 60 new shops will open in Sylvia Park’s Galleria building mid-2020, adding 8,000m2 of retail space.

Precinct Properties’ $1 billion Commercial Bay shopping and commercial complex, under development at the bottom of Queen Street, will unveil 120 new stores in September.

A third of the offerings in the three-level retail complex will be hospitality-focused; half fashion-driven; and health and beauty will be strongly represented.

Michael Sweetman, senior development manager for Precinct, says there will be a mix of national and international tenants including premium global brands. Precinct expects 10 million visitors annually.

“While consumers enjoy the convenience of online shopping, we remain social creatures who will always enjoy eating, shopping and being entertained with family and friends,” says Sweetman.

“The key for property professionals developing and managing retail properties is to acknowledge that if online shopping represents time saved, then ‘real-world’ shopping must be time well-spent.

“The way to ensure time is well-spent is by providing rich experiences.

“The design of the laneway typology, interconnecting bridges, glazed ceilings, hanging gardens, recreation of Little Queen Street and the urban material palette all create a sense of discovery, and sensory experience that you would struggle to get in a traditional shopping centre environment.

“We have also selected a retailer and food and beverage mix which will provide differentiated retailer experiences for customers, with events and activations in and around the space to ‘surprise and delight’.”

Sweetman says retailers are increasingly making flagship brand statements in CBDs. Commercial Bay’s location positions it well to leverage off evolving city growth.

In 2015, Icon Group purchased the heritage-listed St. Kevins Arcade on Auckland’s Karangahape Road, aiming to restore it and elevate the bohemian precinct in the leasing market.

Adam Stevenson handles marketing and investment projects for Icon Group and says the arcade’s architectural heritage and role in the culture of K’ Road provides a unique experience.

“We have award-winning restaurants and cafes, multiple live music venues and some of Auckland’s best boutique retailers, which contributes to a rich and authentic cultural experience for an eclectic audience,” he says.

“We explored the laneways of cities such as Melbourne and found that staying connected to an area’s creative community is what maintains and feeds the culture in such places.”

Icon introduced summer markets to connect artists with the community and has regular exhibitions in a pop-up space, creating an ever-fresh “event experience”.

“As the lines of traditional bricks-and-mortar retail and online retail blur, we’ve looked into interactive digital kiosks for St. Kevins Arcade that could be self-sufficient once set up,” says Stevenson.

The Midway Shopping Centre in Palmerston North recently came to the market following an upgrade and consolidation of the tenant covenant by its Auckland-based owner.

The established retail site with eight tenants and good customer parking was an opportunity-laden investment when purchased in 2012.

It is anchored by two longstanding businesses – a whole foods store and Pizza Hut – bolstered by a nail salon, an artisan European-style bakery, laundromat, fruit and vegetable store, a takeaway and Liquorland outlet.

The owner says the tenant mix is well-balanced, which is easier when you own all the shops.

“As a suburban retail centre, Midway has a mix of specialty retail tenants whose offerings are not impacted by e-commerce, although some are leveraging off social media to grow their businesses.”

Read more market insights from Total Property

Subscribe to receive the latest commercial news and insights from Bayleys Total Property