Shoppers still head for the stores
Despite the growth of multi-channel retailing, the demand for and development of retail premises continues unabated. However, challenges and changes lie ahead.
Strong retail spending resulting from a buoyant economy, tourism and population growth is creating increased leasing demand for retail premises.
“A good level of GDP growth, low unemployment, ultra-low interest rates and rising house prices have had a very positive effect on retail spending,” says Ian Little, Bayleys’ national research manager. “All equate to people feeling wealthier – and when we feel wealthy, we spend!.
“Record net migration feeding into population growth, currently at a more than double our historic average, and soaring tourism numbers also supporting higher levels of retail spending.”
Little says the proliferation of new and expanding retail premises has raised the question of whether New Zealand is heading for an oversupply.
“However, if you consider the amount of retail space we have per person, at just under one square metre, we are certainly not over-shopped. At a national level we remain below the UK, Australia and the hugely over-shopped US where the ratio is more than three sq m per person.”
Auckland has the highest ratio of shops per person in New Zealand at around 1.3 per sq m, similar to the UK but still well below Australia and the States. This indicates there is an opportunity to add further retail space to the market, says Little.
This is further supported by low retail vacancy rates in most shopping centres and in prime CBD retail vacancies in Auckland, Wellington and Christchurch which stood at 2.0-4.2% in Bayleys Research’s latest surveys.
“The supply of quality retail premises remains very tight so it’s not surprising that retail construction activity is reaching new highs with the total value of retail building consents now above the pre-GFC levels of 2006/2007. Much of that activity is occurring in Auckland, driven by strong population growth, and in Christchurch as part of the earthquake rebuild.
“We can expect to see continued high levels of retail development activity for the next few years encompassing both new and key existing premises.”
Lloyd Budd, Bayleys’ director commercial, retail and operations, says key retail trends that will have an impact on development and leasing over the next few years include:
Need for speed: Customers are increasingly demanding goods faster so retailers are having to develop alternative distribution strategies. “Consumers now have lots of options and aren’t necessarily prepared to wait for products to be shipped from offshore,” says Budd. “This will force retailers to develop more logistic facilities next to or near their shops and look at better and quicker ways of getting products ‘the final mile’to customers such as the use of drones and driverless vehicles.”
18-hour cities: There will be more “shop-work-live-play” mixed use developments. This concept has been widely embraced overseas but is in its infancy in New Zealand, says Budd. Office components are being incorporated into shopping centres and given the push for greater residential intensification, apartments within major shopping centres will also become part of the landscape. More than 100 apartments at Milford Shopping Centre are being marketed off the plans and a number of apartment towers are planned at Pakuranga Plaza. Master planned mixed-use developments incorporating all four elements include the Alexander Park development in Greenlane and Westgate Town Centre.
Work/Life balance: Service retailers doing a good job of catering for the increasingly diverse convenience, health and leisure needs of busy people are thriving, says Budd. “There are a growing number of quality, affordable food and beverage offerings popping up, particularly those providing healthy ‘fast’ food options. A diversifying health and well-being sector is also generating increased demand for premises offering everything from yoga and mindfulness to crossfit. Another good example is Bupa which now has over 100 retail stores across Australia catering for a variety of health care needs.”
Ethical sourcing: “Dollar voting” is a new coined phrase that indicates customers have increasing awareness of where retailers source their products. More consumers are happy to pay a premium for ethically sourced and sustainable products, says Budd. Retailers can also have a positive environmental impact through their real estate, with Ceres Organics the first New Zealand retailer to receive a five-star Green rating for its headquarters. Lendlease has introduced a Green rating tool for its Australian retail portfolio which retailers can display.
Public transport hubs: The sheer number of people going through transport hubs is bringing a push for better retail services in and around key transit areas. Auckland Transport has already joined forces with Countdown to provide a “click and collect” service at five locations and has a number of plans for expanding retail services across its key transport locations, says Budd.
Return of the human touch: “This is all about experiential real estate, providing customers with a special experience which they can’t get online,” says Budd. “We’re already seeing this in concept stores operated by the likes of Apple, Nespresso and Tesla, the first car dealer to take space in a shopping centre. They are not really there to sell you products, as they do most of that online; they basically promote the brand and make people feel good about it.” Bars and restaurants are also broadening the experience they offer customers, with Dr Rudi’s in the Viaduct in Auckland recently installing a bowling alley.
Read more market insights from Workplace
Subscribe to receive the latest commercial news and insights from Bayleys Workplace