Retail - Workplace -
Large format retail remains a very well-performing segment of the retail market despite ongoing supply chain disruption, cost increases, a weaker New Zealand dollar and the fact that consumers are generally tightening their wallets.
Because big box retail is in the volume game, with the cost efficiencies that come with that buying power, the cost of living crisis plays into their hands to a degree as affordability becomes more important to consumers.
Chris Beasleigh, Bayleys national director retail said large retailers did particularly well throughout the pandemic-affected years, and continue to trade profitably – albeit, with some of them reporting lower annual earnings for the past financial year.
“Vacancy rate in the large format segment is very low and it’s increasingly hard to find space for a large operator to lease,” he said.
“There’s also not much of a pipeline of new development coming onstream given rising construction and lending costs, and a shortage of favourably-zoned land. “Some new developments are currently on hold, with developers pausing and looking to reassess when there’s a bit more clarity around interest rates, while some retailers are sitting on the commitment fence given the high rents that new developments demand.”
Beasleigh said leasing transactions for large space take time and some are in play for 6-18 months, depending on the complexity of the deal.
“There’s always so many moving parts for big box retailers, however we are seeing strong commitment from the major players around the country when space does become available.”
Retail developments and precincts like Pinehill Central, in Greville Road, Albany and the Timaru Showgrounds complex in Timaru, are filling quickly and have enabled smaller operators to leverage off the “pull” that the anchor tenants provide.
“Pinehill Central is anchored by Countdown and Palmers, and we’ve now added Bargain Chemist and fashion retailer, Shine On to that mix,” said Beasleigh. “Timaru Showgrounds is anchored by Countdown and Bunnings Warehouse and has attracted a wide range of quality retailers and food and beverage operators on the back of demonstrated confidence from the big guys.”
Meanwhile, New Zealand's largest Kmart, the Manukau Supa Centa Store in Auckland, is now open and joins Auckland's Sylvia Park as the second outlet to operate 24/7.
“Kmart has said that this new megastore has been 10 years in the making, as they struggled to find a site that could accommodate a toughly 5,000sqm floor plan. “To keep Kmart’s shelves stocked, and to fulfil online orders, it also has a new 40,000sqm distribution centre planned in Ruakura, Hamilton which shows the behind-the-scenes capacity required to operate in the wider New Zealand market.”
With Swedish retailer Ikea reportedly committing to a site at Auckland’s Sylvia Park, it will also be interesting to see what impact this will have on existing retailers of cost-effective furniture and homewares – and what other retailers will gravitate to the precinct hoping to leverage off the footfall Ikea will attract.