The mall is dead. Long live the mall

The mall is dead. Long live the mall

Total Property - Issue 6 2017

Malls are in decline around the world, but could they be reborn as thriving town centres? Total Property looks at how New Zealand’s commercial property sector is bringing new life to the country’s shopping centres and retail parks.

The traditional suburban shopping mall is in crisis as operators face declining revenues and a customer base that seems increasingly intent on getting its retail fix online.

The decline has been most noticeable in the US, where thousands of mall-based stores have shut up shop in what’s fast becoming one of the biggest waves of retail closures in decades.

Many property experts are unwilling to write malls off, though, believing they can be reborn as vibrant town centres that offers visitors an experience that goes beyond shopping for goods.

It is becoming the norm now to say that shopping centres of the future will tap into the town centre experience of old: becoming a meeting place within the suburbs that house them and offering not only retail outlets but also hotels, office towers, entertainment options and residential spaces.

Malls were built to replicate the experience of being in a vibrant town centre, as high streets were beginning to decline. Indeed, the father of the suburban shopping mall, US architect Victor Gruen, hoped they would bring a town square experience to what he thought was sterile suburbia.

At their most basic, malls are large, sprawling buildings – about 25,000m2 in size – with lots of shops and parking. They are typically located along major arterial routes and are essentially “the high street”, just in a different physical form.

The mall made its debut in New Zealand on October 30, 1963. Lynnmall, in west Auckland, was heralded as “New Zealand's first American-styled shopping centre”, and came as Auckland's burgeoning population was pushing westwards.

More malls and shopping centres followed, and there are now more than 150 shopping centres scattered across the country, covering more than 2 million square metres of rentable area. However, New Zealand’s mall footprint has never really reached international levels – it is 0.5m2 of mall space per person, compared to 1m2 in Australia and 2.3m2 in the US.

New Zealand’s unique geography, small population and distance from other major countries have all played a part in limiting mall development. And until recently, popular international brands have been reluctant to establish a presence here.

Retail NZ public affairs general manager Greg Harford says: “By international standards, New Zealand is a relatively small market. While it’s taken time for global firms to move into New Zealand, our relatively strong economy has encouraged a lot of overseas retailers to enter the market. This makes it even more important for Kiwi retail businesses to provide outstanding customer experiences.”

New Zealand’s limited exposure to the economic headwinds affecting retail markets in the US should give mall owners and developers here freedom to experiment with new forms. and transform malls from “absolute destinations” - ones that require a concerted decision to visit – into community hubs.

New Zealand doesn’t need to look far for an example of this future, with Sylvia Park, in South Auckland readily embracing the “town centre” concept and adding office space and high-end dining experiences to its retail offering.

First opened in 2006, the 80,000m2 mall now attracts 12.6 million visitors a year, generates more than $500 million in annual retail sales, and is home to 203 tenants - with a long list of retailers keen to have a presence there.

Connectivity is without a doubt its main strength - it has its own train station, is linked to major arterial roads and is no more than a 20-minute drive away for 50 percent of Auckland’s population.

Owner and operator Kiwi Property refers to Sylvia Park as a town centre, not a shopping centre, and points to the fact that even Auckland Council categorises it in the Unitary Plan as a Metropolitan Centre – defined as a regional centre around which commercial activities will be clustered.

“We increasingly see ourselves as town centre investors, creating diverse, engaging environments for New Zealanders. Our properties are places [in which] to shop, work, connect, live and grow,” Kiwi Property chief executive Chris Gudgeon said earlier this year.

Construction workers at the park are busy building an $80 million 10-storey block that will offer 11,200m2 of office space to be anchored by multinational insurance firm IAG. Also on board as a tenant is Kiwi co-working firm BizDojo.

Following Kiwi Property down the “town centre” path is New Zealand Retail Property Group, which recently showcased its plans to radically transform its shopping mall offerings in Auckland’s North Shore.

At its Highbury holding, it plans to build five high-rise luxury apartment blocks above a vastly expanded shopping mall, while at Westgate, in Massey, already one of Auckland's largest retail offerings, it plans to add high-rise apartments.

The company already plans to use the airspace above Milford Centre, its 14,000m2 mall on Auckland's North Shore, to build 115 luxury apartments, and when building Westgate, NZRPG worked with Auckland Council to ensure it replicated a town centre, with street-based shops as well as internal retail, commercial business, public areas, and strong transport links.

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