What is really underpinning NZ’s retail growth spurt?

  • Property
  • September 9, 2015
  • Paul Keane
What is really underpinning NZ’s retail growth spurt?

In recent columns, we commented on retail experiences offshore. We were impressed by the activity in shopping centres in the UK and Europe, and the fact that shopping centres really were community hubs, and were well supported. We expressed the view that retailing was vital for the lifeblood of cities, and online shopping had not seemed to impact on the performance of shopping centres.

In Auckland over the weekend, the New Zealand Herald ran a story with headlines suggesting we were now in a retail growth zone, with significant new retail developments emerging in Auckland. So are we in a growth phase, or is this the “same old story” for retail, just a momentary change in media focus from housing stories? We have pondered this, and reflected on what has happened in retail development over the years.

The history of NZ shopping centres

Retail development is driven by growth in population. Over time, the most popular shopping centre developments have proven to be covered centres. In the mid to late 1960s, emerging new shopping centres in New Zealand were Lynnmall and Pakuranga in Auckland, and Riccarton and Northlands in Christchurch. They were the pioneer centres. They were not enclosed but rather a collection of shops with car parking available. By the 1970s the idea had gained momentum and in Auckland, St Lukes, Manukau, Glenfield, Shore City, WestCity and  Downtown were all born, whist Johnsonville and Wainuiomata in Wellington were also developed. This decade, particularly the first five years of it, would have been the most active in shopping centre development in the history of New Zealand. It wasn’t so much driven by population growth but by an international trend for shopping centre development, which was embraced by customers as the preferred shopping environment. Strip shopping as a result became a bit of a casualty.

By the 1980s, demand for retailing increased further with the famous trading hours extension, moving first to six-day and then seven-day shopping. Customers wanted to shop on weekends, so demand for retail space became even more intense. By the 1990s, we saw the development of Large Format Retail centres. Westgate – a new large format, mixed use form – was developed on a greenfield site in Massey, Auckland.

At the time, RCG forecast a population to service this centre of about 108,000 people over 10 years. Some commentators scoffed at the time that these figures would never be achieved. Westgate however was an instant success, and the new DNZ NorthWest Shopping Centre, which opens across the road from the original centre in just over three weeks, is testament to the demand for retail space and the fact that the area now services some 500,000 people with a predominant number of them being on high incomes.

Population size goes hand-in-hand with retail growth

As a result, the growth in Auckland’s suburbs in all directions over the last few decades has boosted residential areas, and thus generated the need for more retail. It’s all rather simple, and it is not a proliferation of retail development. Southern cities such as Wellington have not benefited from population growth, so retail demand is not aggressive. Hamilton has had a significant increase in retail shopping centres, and that again is due to an increase in population. Christchurch is undergoing a resurgence in retail development, but significantly it is restricted to the CBD where the city is being rebuilt. Suburban growth is predominantly catered for and is not seeing the growth of Auckland.

Over recent times we have been inundated with the level of online shopping, which is apparently hindering “real retail growth”! NZ Retail has been pursuing some form of taxation on online shopping, which the Government are now pursuing. The irony is that bricks and mortar growth is still apparent. This will always be the case, regardless of online shopping, and particularly where population growth is apparent.  One can only imagine the growth in spend in certain parts of Germany from the growth in population through the refugee crisis. And “yes” before we get a comment, refugees have to be fed and housed and somebody will benefit. It’s called “population growth”!

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