ne 2013, a peak result of a net positive 57 per cent of respondents were confident for the Christchurch retail sector’s investment fundamentals. However, by March 2016, this had reduced to a net positive six per cent. In discussion with our Colliers office in Christchurch on this turnaround, director of retail Nick Doig noted that the tide was turning as retailing confidence at the coalface was improving. Doig also commented on the fact that as several major new offices near completion, interest in the CBD retail precinct is now gathering momentum. This has given retailers a great deal of confidence and we’re seeing new entrants to the Christchurch market. For instance, the ANZ Centre has recently signed high profile brands Superette, Partridge Jewellers and Macpac. Other retailers currently in temporary container mall Re:START are eyeing their options, with many close to signing for new premises next year. They enjoy the benefits of being located near one another and want that to continue when they shift. Christchurch is not alone in the recent return to form. Investors in Auckland and Wellington retail property were at a net positive 48 per cent and 30 per cent, respectively, in the June 2016 survey. These is the highest levels of confidence both cities have seen since the Colliers survey began in 2008. Despite this rise in confidence and sales activity, Auckland and Wellington investors are more confident in the office and industrial sectors when it comes to investment fundamentals. However, mixed messages are not an uncommon occurrence in the retail sector. Even at the base demand and supply level there seems to be inconsistency. The New Zealand Institute of Economic Research’s latest Quarterly Survey of Business Opinion showed merchants were particularly pessimistic about the next quarter. Only a net positive two per cent of respondents were confident in trading expectations, albeit this was slightly above the long-term average of minus four per cent. Contrary to this pessimism and conveying mixed messages between sentiment and reality are Colliers’ Auckland, Wellington and Christchurch retail vacancy surveys which are currently near record lows. This indicates demand is strong and fundamentals are supportive. An additional factor likely to be influencing retailer’s expectations is the growing competition they face: primarily from new offshore entrants and online shopping. Growth in the main centres will inevitably create change by attracting new brands, however, ‘online’ versus ‘offline’ dynamics have not changed, remaining primarily a threat to smaller, less established retailers selling substitutable goods. Quality of the product offering for investors, in terms of the building and the location, as well as the lack of available stock is likely a key factor lowering investor sentiment. This does have a slightly contradictory impact on investment returns, as when quality product is available, investors bid strongly. This was recently seen in the past 12 months with just over $1 billion of retail property sold or expected to settle soon. This included three Westfield shopping centres in Auckland, Hamilton and Wellington, 19 countdown supermarkets across New Zealand, Auckland’s Shore City Shopping Centre and ‘Zone 7’ bulk retail centre and the half share in Hamilton’s The Base to name a few. The head of the Capital Markets team at Colliers International, Peter Herdson, was recently quoted as saying most commercial property sectors are enjoying buoyant conditions right now and the retail sector is up there with the best of them. Retail has recently eclipsed previous years of sales activity as a result of the increase in assets available to purchase as well as the strong outlook in asset appreciation. This bodes well for increasing levels of investor confidence across New Zealand, especially as investors struggle to find opportunities in this extended period of economic and financial prosperity. And in the Christchurch market, where confidence has bounced back and is expected to continue rising, the increasing supply of retail property for investors to purchase as well as the stronger retailing environment, can only keep the momentum rolling. Chris Dibble is director of research and consulting at Colliers International. He can be contacted at chris.dibble@colliers.com or +64 (0)9 358 1888.