The executive chairman of property, design and research specialist agency RCG, Paul Keane, discusses the four property and retail issues that have caught his attention this week: the potential for GST to be added to on online sales, the syndication of another shopping centre, the housing boom in Auckland, and the emergence of the ‘sunset age’ within retailing.
GST will be added to online sales
We commented a couple of years ago of the potential influence on the IRD collecting GST on sales from online activities. It will happen, it’s too much of an issue for the Government to ignore. While the indicated $200 million of tax revenue doesn’t seem like much in the context of the overall government sector, this figure will grow over time as Internet sales grow. So buy online while you can!
Having said that, it’s also about time that retailers stopped whining. Retailers have to roll with the punches and accept and adapt to change. Imagine what would have happened if we had listened to all those moaning retailers in the 1980s who didn’t want to open for Saturday and Sunday trading? New Zealand would still be in the dark ages.
Southgate Shopping Centre syndicated
The most recent announcement of a syndication of a shopping centre was Southgate in Takanini, south Auckland. Is this a good idea? Look, on paper it looks great for investors, sink $50,000 in and the return will sit at 8%, better than most other likely returns. But the age-old question still emerges, how do you get your money back? Despite the negative financial outcomes of the GFC period, investors still seem keen to invest but sometimes forget the longer term implications. Issues such as ROI over time, longevity of the respective tenants, and rent reviews seem to be ignored for the sake of a few more financial percentage points! The old adage, “remember the past and plan for the future”, still applies!
Housing boom here to stay
Quite frankly, the housing boom in Auckland which the NZ Herald puts on its front page every other day, is boring! Why? Well as long as we continue to increase our population, with most of the growth happening in Auckland, we are going to see a lack of housing. It’s that simple, end of subject. The issue will never change, the market will dictate.
Retail is in the ‘sunset age’
We are entering a new age of retailing. We call it the “sunset age”. What does this mean? In the early 70s, we developed the covered shopping centre. In the 80s, we built more covered shopping centres and installed air conditioning. St Lukes in Auckland was a shopping centre benchmark. In the 90s, we built the large format centre. We then paused until the 2014s. Now we are seeing more retail expansion, with new and fresher shopping centres emerging.
The Robina Shopping Centre, in Queensland, is a great example of this. It was predominantly developed as an open-air shopping centre, and it struggled. Retailers were given generous occupation incentives, but it still didn’t fly! Meantime, population grew and the owners undertook a major redevelopment.
Today, it is a thriving, fully enclosed retail environment that is world competitive, with all the top brands from across the retail range. It has also forced the owners of Pacific Fair on the Gold Coast to rethink their centre, and as a result that also is undergoing a complete redevelopment.
What is the ‘sunset age’?
So what do we mean by the “sunset age”? Shopping centres can really only last 10 years, and by then customers become bored. Further, as our population ages, the propensity for spending more time, rather than less, in retail environments will increase. Regardless of the inclination to “shop online”, our older citizens will want more social connection and a return to the past will be on the agenda!
The challenge will be to get that generation to spend “more than less”. The bonus will be that young and old will shop together. Older citizens are getting older but feeling younger. They relate to all age groups and as a result mix with them. The result is a larger spend across all generations. Hence the benefit of the “sunset age”.
Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils. This article was originally published on RCG’s blog.