Changing retail trends impact commercial property

2:58 PM Tuesday August 19, 2014 Colin Taylor

Faced with the rise of internet shopping and huge city fringe shopping centres, independent neighbourhood retailers need to work harder than ever to secure consumer business, says John Church, newly appointed national commercial director of Bayleys Real Estate. 

Faced with the rise of internet shopping and huge city fringe shopping centres, independent neighbourhood retailers need to work harder than ever to secure consumer business, says John Church, newly appointed national commercial director of Bayleys Real Estate.

Church says where and how consumers are spending their shopping dollars has become a much more complex issue within a more expansive environment and this also impacts on commercial property.

“There is still very much a place for such traditional cornerstone shopping precincts and consumers still have the same needs, all retailers must move with the times to stay alive and convenience is a top priority,” Church says in an in depth article on evolving retail trends and how they impact on commercial property dynamics.

He says traditional neighbourhood retail precincts used to include food and beverage outlets like a dairy, liquor store, fish and chip shop, and video store. Such operations offered consumers a place to pick necessary household items on the way home, all on their doorstep. “To drive business and stay in the game, retailers must understand changing consumer needs. Relevance is the key to success in retail,” he says.

Commercial Property - John Church of Bayleys.jpg

John Church- National Commercial Director Bayleys Real Estate

Kiwis’ overall retail spending remains buoyant and there is no doubt that the online space is becoming more active. In New Zealand six to seven per cent of total retail shopping is online, with the percentage of clothes bought online more than double that. That figure is expected to grow by up to 15 per cent each year as more New Zealanders embrace online shopping. By comparison, projected annual growth of total retail spending is three to four per cent.

According to figures from Paymark, which processes around 75 per cent of all electronic transactions in New Zealand, last Christmas Eve and Boxing Day pushed December 2013 spending up by 7.5 per cent on 2012.

Church says one consideration for retail businesses now is whether they will sell online exclusively, or sell in-store only, or utilise both “spaces”.

“If they choose the last option, commercial property will continue to play a huge role within the retail sector, for example by meeting the growing need for strategically located warehousing spaces where goods are moved from supplier to customer.”

During the 1960s and 1970s limitations on product supply meant manufacturers were the key players in the retail market. With the major expansion of national chains such as Briscoes, Harvey Norman and Whitcoulls in the 70s and 80s,those selling the products took over the power.

Consumers now hold the weight of power and are expected to continue to do so, with the world of retail opening up to offer customers access to any brand at any price in the world, says New Zealand Retailers Association chief executive John Albertson.

In this environment, the consumer has a wealth of choice nationally and internationally at their fingertips. Depending on their needs and the shopping experience they want, they can choose to buy online, go to a shopping centre, to their neighbourhood retailer or to a local market.

Typically consumers will now use a range of different ways to buy the things they need. Weekly fruit and veggies might be purchase from a local market, wine could be purchased with groceries from a supermarket and the latest DVD downloaded online.

With retail market opening up and consumers having a greater choice about where and what they want to buy, all retail shops and precincts must keep talking to their customers to stay relevant, says Albertson.

This means real estate must change along with the ‘moving feast’ of changing retail business including new builds in established and growing areas, bigger malls and expanding neighbourhood precincts.

“Retailers are really going to have to understand what their customers want. Unless you’re delivering the service your customers wants, you can’t buy loyalty.”  

Nathan Wylie, PwC partner and retail industry expert, says that traditional neighbourhood shopping precincts still have a place but they need to stay flexible and relevant if they are to compete with online and large shopping complexes.

“However, as well as offering convenience, small neighbourhood shops have an added advantage – Kiwis like to support their local traders,” says Wylie. “Accordingly, property in such spaces is likely to remain attractive and I would like to think small retail precincts will continue to have a part to play.”

“However, they need to think about how they cooperate among themselves to be a destination for a community,” says Wylie.

Church says consumer priorities are driving the changes and when it comes to making the decision about where to spend, with a combination of factors led by convenience, along with as price, location, selection, and environment coming into play.

In Auckland and Wellington mini supermarkets are popping up around the central cities to cater to apartment dwellers without cars.. Pop-up shops, bars and takeaways are a growing phenomenon that meets consumer demand for fresh and relevant services.

Albertson says the location of such shops is typically determined by vehicle and foot traffic. They are essentially ‘new builds’ designed to cater to a specific customers base.

Retail outlets also strive make themselves one-stop-shops. A relatively modern example is supermarkets offering an extensive range of wine and alcohol cutting out the need for consumers to go to another store, and service stations expanding to provide customers with products and services like cafés, takeaway food and drinks, even CDs and traditional basics like milk, bread and ice creams.

Tony Bradley of TPB Properties says shopping precincts are getting bigger and being built on city fringes to increase convenience to shoppers.

Small neighbourhood precincts of just dairy and fish and chip shops side by side are definitely being hit by hubs that have nine or 10 shops, he says.

Last year shops at the Redwood Centre, Rotorua’s largest convenience centre, developed by TPB Properties, opened for business. A wide mix of shops and products is the key to retail success in such developments, Bradley says and Redwood has a medical centre, gym, food outlets and bakeries all under one roof.

Bayleys provides the following retail snapshot from around the regions:

  • Whangarei - Small retail outlets have increased the range of products they offer and the number of brands and franchises such as sushi shops, Spit Roast takeaways and Wendys have also increased in the region, says Bayleys commercial and industrial spokesperson Ross Blomfield. Valentines, Nando’s, Pita Pit, Lone Star and Carl’s Jnr are all planned for the region in the coming months. Retail complexes continue to grow with Bayleys currently working with two developers planning shopping centres in prominent locations Reyburn St and Kensington Ave.
  • Auckland North Shore -National chains such as Hell Pizza have taken over independent retailers, says recently retired Bayleys commercial and industrial salesperson Greg Healey. Strip shopping centres, such as Wairau Junction are doing well. Wairau includes a number of shops and services such as a fitness centre, shops, restaurants and takeaway food.There are a high number of strata titled retail properties on the North Shore, with a preference for freehold.
  • Hamilton -In outlying areas, a push towards sub-divisions has created market for specialised shops and upmarket restaurants catering to the tastes of a range of ethnicities, says Bayleys salesperson Mike Swanson. The opening of Te Awa – The Base Shopping Centre, has drawn business out of the CBD but this has resulted in the resurgence of specialist shops in the central city, he says. There is further growth in the northern regions, with 10-20 retail precincts being developed anchored with a good restaurant, pub and specialist shops, near the planned ring road set to transform the city’s road network.
  • Taupo -  Traditional community shopping precincts are still operational in Taupo and retail location has not changed a lot, says Bayleys Taupo director Yvonne Westerman. The town has seen an increase in Indian restaurants, catering to changing consumer demands. At the lake end of Taupo township new buildings have been developed; one housing restaurant Lone Star and the other that has a sushi bar and remaining area yet to be leased. Taupo District Council recently changed bylaws within the district plan to ensure retail and offices stay within the confines of the CBD, and retail in the central town continues to grow, says Westerman.