This year is set to be a huge year for the retail property sector in New Zealand, with developments underway and new players entering the game. We talk to Bayleys director of commercial, retail and operations Lloyd Budd about the unexpected star performers, and what city’s retail sector is going to change the most. rn
In 2015, New Zealand’s retail property sector boomed in the cities. A raft of big international names entered the country for the first time, beginning with Topshop in March, and then following on with David Jones, H&M and Zara’s announcements.
Recap our coverage of this in our Here Comes the Giants series.
As well as this, a series of significant developments were announced in the major cities.
So, what could happen in 2016 that could possibly top a year like that?
Bayleys’ Budd says the momentum built up last year will continue into this one.
For one, the influx of international brands coming to New Zealand is expected to continue.
Bayleys is in talks with several brands that don’t have a presence here who are looking for space, he says.
The poor dairy payouts will continue to impact on rural areas, with towns that are reliant on dairying and agriculture expected to find trading tough, he says.
But there has also been a shift in areas that are popular for retail property, with the usual suspects making room for some unexpected star performers.
Case in point: Budd’s pick for the hottest area for retail property in 2016 is not Auckland, Wellington or Christchurch. It’s Queenstown.
“I’d love to have the magical answer as to why, we’re trying to find out ourselves. Every retailer wants to be there,” he says.
More than 30 new shops and cafes have opened their doors in Queenstown in the past year, while the first stage of the Five Mile Retail Centre opened on Labour weekend.
Progressive Enterprises opened its new Countdown supermarket at the Five Mile Retail Centre and the store has exceeded expectations from day one, Budd says, while more brands are going to announce Queenstown stores in the next few weeks.
A $40 million ‘Top of High Street’ commercial development is also being pushed ahead by Remarkables Park, which opened The Landing retail complex in 2015.
Statistics New Zealand has projected that the Queenstown-Lakes district will have one of the biggest population growths in the country, increasing by 1.8 percent by 2028.
Budd puts down the popularity of the town down to additional flights to Queenstown being introduced, as well as tourism booming and more people visiting the area.
The town has become exceedingly busy, he says.
“They are now having traffic jams in Queenstown.”
Budd also says Tauranga is a city that’s worth keeping an eye on this year.
There is huge population growth occurring in Tauranga, with Statistics New Zealand projecting the population to grow by 1.2 percent by 2028.
The Bay of Plenty also has the highest levels of annual employment growth in the country (13 percent) beating the likes of Auckland and Waikato.
These trends are in part being driven by Aucklanders relocating to the Bay of Plenty to buy a house and chase employment opportunities as the Auckland housing market soars.
Budd says Tauranga has become a beneficiary of Auckland’s housing growth.
“You have a sophisticated, wealthy buyer that’s relocating to Tauranga and creating jobs and creating retail demand,” he says.
“They have an acquired taste – they like what they like in Auckland – good service, good food – and they want more of those offers from where they’re moving to.”
Budd says the area where retail property is going to change the most over the course in 2016 is downtown Auckland.
The closing of the downtown centre, the development of Commercial Bay and the development of the City Rail Link (CRL) is going to cause major disruption, he says.
The CRL is expected to be open by 2021 and will connect Britomart with new stations near Aotoea Square, Karangahape Rd and a redeveloped station at Mount Eden.
“It’s going to be extremely disruptive to consumers. You think of tourists arriving on boats – they’re not going have that amenity on their doorstep for the next few years, so they’ll disperse around downtown to find amenities,” Budd says.
But that disruption could lead to revenue doubling for retailers placed in advantageous positions in the bottom of the CBD.
“This will be a significant benefit for those retailers that are still trading as the demand is not going away and with downtown closing. Britomart, lower Queen St and in and around viaduct area going to be the natural beneficiaries of tourists coming in,” he says.