The future of retail for New Zealand’s CBDs

  • Property
  • August 17, 2015
  • Elly Strang
The future of retail for New Zealand’s CBDs

Kean spoke of a “new era” in CBD retailing at the 2015 Retail Property Conference last month.

“We’re in a situation in our main CBD centres where we’re going to see a huge amount of population growth, a mushrooming of population,” Kean says.

Downtown Auckland is a case in point, he says, as in 10 to 12 years the shopping district alone will be the size of Tauranga or Dunedin.

“It’s a significant change, as in the early 1990s you could roller skate down the middle of Queen St in the weekend,” he says.

AUCKLAND CBD – the star performer

  • Four square km in size
  • Current population around 24,000
  • 6100 people per square km
  • 180 retail trade units per square km
  • Expected to grow to 410 per square km
  • Around 90,000 salary and wage earners in the CBD
  • By 2025, population forecasted to reach around 35,000 people
  • This doesn’t include 10,000 or so people staying in CBD every night in accommodation
  • Auckland CBD’s population could be close to 50,000 in the next decade

Queen St, Auckland CBD

“There’s an opportunity for retail to rise to meet that demand,” Kean says.

He says retail that’s convenience focused will do extremely well, as city dwellers are more likely to pop into convenience stores than do a big grocery shop every week or two.

Experienced-focused retail will also thrive, he says.

He pointed to examples of other bustling CBDs in the world: Manhattan, which has a population of 1.6 million people (27,000 people per square km) and Seoul, with 22.6 million people living in 1000 square km.

Myeong-dong in Seoul, North Korea

“I’m not suggesting we’re going to head in that direction, but if you go to New York, you’d pass a grocery provider on every second block,” Kean says.

“Why? Because that supermarket that sits there within 300m in every direction has about 25,000 people living there.”

“It’s not just one of two grocery providers like in New Zealand. There’s high-end grocery providers, low-end grocery providers, a Korean supermarket, a Latino supermarket, an organic supermarket.”

He says as the density of people in the CBD per square km increases, there’s an opportunity to diverge your retail offering.

“Arguably, we’re moving in that direction in Auckland and Wellington as we speak.”

The opportunity lies in people within the CBD shopping like they do in the suburbs.

People who work in the CBD might have a low level engagement with shops, he says, but if you live there, you expect local service retail like hairdressers, doctors and a laundromat.

The consequence of this for retailers is the rent is going to rise.

Bayley’s Retail Property Research Report 2015 says Auckland CBD’s rental market is already around $1500 to $3500 per square metre for prime sites and $205 to $900 for secondary sites.

Retailers that will benefit are those that offer character and amenities, he says.

Level one retail will also start to pick up as ground level shops fill.

The aforementioned report says demand for sites is strong, but supply is scarce.

There’s also a question of whether retail will spread out to the fringes, like Ponsonby and Parnell, as demand grows.

He says the CBD will see a lot of development, particularly in and around the top of Queen St.

Wellington’s growth isn’t as pronounced as Auckland, Kean says, but it is still making progress.

WELLINGTON CBD – the quiet achiever

  • 3500 square km in size
  • Total population in 2014 was 20,000 people
  • 5790 people per square km
  • Around 90,000 office workers
  • Population will grow towards 25,000

Lambton Quay, Wellington CBD

He says the grocery convenience scene will take off, as the four supermarkets already established within Wellington’s CBD are trading extremely well – even better than Auckland.

“The traditional retail area has been the golden mile, the Lambton Quay area, but the real opportunities aren’t there,” he says.

“Mount Cook and to the south of Wellington, there’s a significant amount of buildings – low rise development in and around that area.”

He says pedestrian flow will intensify in the southern area of the CBD, as well as from the north.

“The story of Wellington is really a north and south growth story,” Kean says.

The railway station is also worth keeping an eye on, as something may happen there, he says.

CHRISTCHURCH CBD – the underdog

  • 4200 square km in size
  • 30,000 wage earners in the CBD
  • Pre-quake there was 9000 people (just under 2000 per square km)
  • Statistics indicate CBD population will grow to 6250 by 2026
  • Population of 1200 people per square km

Christchurch's CBD in 2009, pre-quake.

Despite still holding the title of New Zealand’s biggest CBD, Christchurch may take some time to pick up, Kean says.

 He says the population is significantly smaller than what’s needed to create a vibrant, bustling city.

“Christchurch has an issue with its aspirations, as post earthquake they says there’d be 20,000 to 25,000 people living in the CBD,” Kean says.

“Maybe it will happen, but not in my lifetime.”

He says the retail offering will remain there to service the working population, rather than the city dwellers.

There’s an opportunity where commercial development goes in, such as East Gate, he says.

“Where [commercial development] does go, there’ll be convenience-based opportunity,” he says.

 REGIONAL CBDS – the slow burner

Market St North, Hastings CBD

Kean says smaller cities won’t have the same level of population growth as the big cities.

“Most of those provincial cities are flat or slightly declining, with the exception of Hamilton, which is seeing a huge amount of peripheral residential growth,” he says.

“Nelson CBD is growing, Queenstown is growing. With the exception of those cities, growth profiles are pretty flat. That whole provincial story is another story altogether.”

He says in places such as High St in Hastings, big national retailers have always driven demand, but for the most part those shops have merged or disappeared from the towns and no other businesses have replaced them.

Hasting District Council has says as much, indicating that just 86 percent of shops were occupied at last count.

“Hastings’ problems include the rapid rise of online retailing, the unsuitability of aging buildings – some of which need earthquake strengthening - and the impact of one-stop ‘big box’ retail,” the council says in a statement.

It says Hasting CBD’s retail area was also too long in today’s retail environnment, covering six blocks.

Mayor Lawrence Yule says many changes must be considered to bring the city back to “full vibrancy”.

Ideas being considered are shrinking the retail area, re-examining the paid parking system and creating a residential development within the city.

The council noted the success of bringing in Kiwibank, which brought 200 more people to the CBD.

“Attracting those kinds of businesses into the fringe areas of the retail heart remains a council focus,” it says.

This is a real cause for concern for the town, as retail accounts for 27 percent of jobs in the district and is the second highest contributor to the region’s GDP, making up $79 million of the GDP of $637 million.

“The councils [in places like Hastings] have a real challenge on their hands,” Kean says.

​ ​

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