My comments last week on the future of shopping centres received some wide commentary and some direct feedback. The principal response was the ability for retailers to be able to pay the rents on offer for new space, and who then will fill the space being built. The very recent announcement that Bayfair Shopping Centre in Mount Maunganui Tauranga is to have a $100 million dollar refurbishment and expansion including cinemas and additional retail would seem to fly in the face of my comments last week.
"It takes many years for a shopping centre to be planned, and it takes even longer for an existing shopping centre owner to expand an existing centre particularly where new space for expansion has to be acquired".
This is the case at Bayfair where the retail offering has been stagnant for years, and unless a major redevelopment is undertaken, the centre runs the risk of further erosion and very stiff competition.
Tauranga of all regional centres has been impacted by what I call the "Auckland Invasion". These are the retirees predominantly who have sold in Auckland for a healthy profit and moved to Tauranga in such locations as Bethlehem, Papamoa etc. I emphasise the word "Retirees". These older folk don't necessarily work so their spend is somewhat less than other consumers. The retail growth in Tauranga has been far more significant than any other region. The Crossroads has been built at Tauariko, and plans for a major Town Centre in Papamoa are already on the drawing boards.
I suspect that the announcement of a $100 million dollar redevelopment and expansion of Bayfair shopping centre was forced on the owners by the pending competition.
Tauranga is unique in that people living in Mount Maunganui will shop in the area and those in Tauranga will shop in their closest neighbourhood. Tauriko and Bethlehem therefore will have their own followers as will Bayfair. Consequently, people are now less inclined to travel a distance to a shopping centre if they have like offerings on their doorstep, and online shopping also has a separate appeal. The secret is therefore for Shopping Centre owners to make their centres more appealing than others in an endeavour to reach out to people living beyond that centres traditional trade area.
"Watching what happens in Tauranga over the next couple of years will be a benchmark indicator for the rest of New Zealand retail."
Certainly there will be a significant pursuit of likely retailers to occupy the space on offer. One assumes that Bayfair have already acquired a cinema operator, but the rest of the space will need to be filled to make the financials work for the developer and its bankers.
Sales will be the dominant driver for all retailers going into 2018 and the added attraction will be easy and free car parking, something that Bayfair as an example has lacked in quantity to date. Challenges are certainly ahead, but for the sake of Bricks and Mortar, I hope the owners do well, and the outgoings on offer give an opportunity for retailers to make some money in what I suspect will be fierce competition.
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.