According to Colliers International’s half-yearly report, there are encouraging indicators for New Zealand’s main CBDs, with Auckland on fire. The country’s economic strength has lifted the retail sector out of a lacklustre period of consumer spending, but mixed messages keep emerging, with only select retailers winning in an environment that is benefiting from record high immigration, strong labour conditions and a rising housing market in a low interest rate environment.
Effects from online retailing continue to impact retailers selling substitutable products, especially in regional locations, but the government’s review on GST for online goods is anticipated to assist in the future.
Diverging expectations on upcoming economic and consumer activity means some retailers are in for a reality check. Upcoming rent rises will quickly separate the underperformers according to Colliers. Investors will be mindful of their tenant choices, but the shortage of favourable stock and a growing pool of investors will keep demand strong, and yields firm.
Key findings show that the level of demand for retail space in Auckland CBD, the suburbs and shopping centres is acute. Vacancy rates are down across all of Auckland. Retail spend will be driven particularly by rising house prices and real wage growth. Developers have upped the ante to satisfy demand, but pressure remains for rents to rise. Not all retailers are able to absorb higher costs, with economic headwinds, the growth of online shopping, competition for space and a new era of consumerism likely to produce challengers for some retailers.
2015 is turning into a pivotal moment of change for Wellington retail. Rising offshore interest is a major turnaround, boosted by David Jones and Seed Heritage setting up shop in Wellington. Rumours of Topshop opening have added fuel to the fire. The positivity will spread, leading to rental rises that boost investment activity.
Christchurch CBD retail is on the cusp of a return to prosperity, enabled by new private sector developments. Adequate car parking and the timing of key anchor projects remain the sector’s hurdles, but they are necessary to boost pedestrian counts sufficiently. Outside the CBD, retail’s footprint has expanded significantly and is flourishing. Outside the main centres, retailers in a growing catchment well serviced by an increasingly wealthy and growing resident or tourist population, are doing well. In underperforming CBD retail locations, new office, residential and student developments are heralded as key catalysts to increasing pedestrian counts and driving retail spend up. The continual rise and popularity of suburban convenience centres and large format retailing remain key areas of consideration for retailers, investors and planners for the future.
