Retail spending might be slowing but demand for space in top quality shopping centres and strips shows no sign of dipping.
International, national retailers and local retailers are keeping the foot on the pedal as they expand their businesses around New Zealand into a variety of shopping centres from large format developments to high street strips.
Although Statistic New Zealand’s latest figures show core retail spending at a steady but slow 0.1 per cent a month since the middle of last year, unemployment at a 22-year low of 3.4 per cent is keeping consumer confidence relatively resilient.
New Zealand’s unemployment rate is the fifth lowest among developed countries and economists predict it will remain low for a long time as labour supply is not keeping pace with demand. Wages are rising at their fastest rate for years.
As the economy takes a few twists and turns in the wake of the US sub-prime mortgage crisis, retail developers are continuing to plough money into shopping centres and returns on their investment in the past couple of years have been spectacular.
The Property Council of New Zealand’s latest Investment Performance Index shows bulk retail returning 21.99 per cent, shopping centres 24.52 per cent and other retail 20.77 per cent.
Against this backdrop, Colliers International’s national retail team has launched New Zealand’s first nationwide retail leasing portfolio. Nearly 60 premium properties from Kerikeri to Queenstown are included in the portfolio.
Colliers International’s national retail manager Ash Hira says the continuing demand from retailers to be in top quality projects will continue as developers produce well designed projects in the best shopping locations.
“There is no shortage of tenants and there are a number of Australian retailers waiting for the right development to launch a push into the New Zealand market. The biggest job is helping tenants secure the right premises for their business.”
Colliers International’s 19-strong national retail team is the biggest in the country and specialises in bulk retail, shopping centres, convenience and strip retailing. In the past 17 years the team has leased hundreds of thousands of square metres of retail throughout New Zealand.
The continual shopping centre growth and retail expansion has brought back into focus the perennial question: Is New Zealand over-shopped?
Evan Harris, Livingstones’ director of property management, say no. Livingstones, partly owned by Colliers International, has years of study to back up its claim that natural population growth and changing lifestyles means a continual need for more shops.
Harris says based on population growth alone, Auckland will need another major shopping centre within two years.
A recent Australian publication pointed out the need for a big new retail centre every year in Sydney if the city’s current population of four million keeps on growing at 2.5 per cent annually. At that rate more than 100,000 people will flood into Sydney every year and with average shopping space of one sq m per person that means an extra 100,000 sq m of retail space is needed year on year.
Harris says translated to Auckland’s population of one million people and the city will need an additional 25,000-35,000 sq m of retail space – the equivalent of a major shopping centre – every year.
“It is interesting to note also that in the United States more than 50% of retail spending is in shopping centres. In Australia it is well over 40%, but in New Zealand it is only around 25%.”
Of the country’s major cities, Christchurch is a good example of so-called over-shopping,” says Harris. The Palms, Riccarton, Northlands, Eastgate and Hornby Malls have undergone massive expansions in the past three years and there are few, if any, empty stores in these malls – half a dozen at the most. It’s a simple equation – if shoppers did not want continually expanding retail they would not spend their money and the shops would not be there.”
The challenge for retailers is differentiation between shopping centres. Harris says this can be achieved through the tenant mix, the location and a well planned and managed centre. “Well designed centres such as Albany do not often get it wrong.
Hira says retailing has been a growth area in New Zealand’s property market in the past few years. We don’t see any immediate easing in demand, particularly as Australian retailers now regard New Zealand as an adjunct to their own market.”
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