I really struggled over the weekend with stories as to the potential decline and future of shopping centres. Two stories relating to this was in the NZ Herald, and a lead article on TV One News - suggesting that the Wellington CBD was affected by a decline in retail sales. In fact the latter report suggested that the CBD was 0.7 percent down on sales. How come these stories emerge? I am not sure frankly, but I put it down to people making stories up out of nothing.
In the case of the shopping centre decline, it is not "new news" that certain regional shopping centres abroad have deteriorated.
Further, centres that are left to languish due to the owners not reinvesting are likely to ultimately fail. In the 1960s, major tenants such as Farmers negotiated 50 year leases. In recent time these leases have shrunk in terms to 12 years plus, the consequences are apparent. However, in terms of New Zealand centres, it is unusual for shopping centres to close because of patronage decline. Certainly, the "mixed use" development is not something new. In the USA this form of mixed development is common and successful, but it does not signal the decline of shopping centres as such. The fact that mixed use developments are emerging as a threat or replacement of the typical shopping centre is baloney. The mixed use development is an effective tool for bringing consumers, retailers and residents, and commercial activity together in an environment that they can all enjoy collectively, and bring positive results to each other. However, its effectiveness is all about the retail environment which is required if the total concept is to work effectively.
In respect of Wellington's CBD being under threat, this again is a misleading story.
If one was to try and secure retail premises in Wellington’s heart, it would be very difficult. Space is limited. Pedestrian counts in Wellingtons CBD remain high and new retailers such as David Jones and the like have further boosted consumer interest in the area.
I really do question the context of some stories that emerge which suggest one form or another of a retail environment are deteriorating or closing. Certainly, online shopping has gained momentum, but retailers themselves are improving sales by going online. The same retailers like our friends Amazon, are also opening bricks and mortar stores. Retailing is an evolving industry driven by market demand. It will continue to change and challenge its participants, but it does remain alive and well. The shopping centre industry that forms a significant part of the retail environment is not likely to lie down and die any time soon.
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 post originally appeared on RCG's blog.