Global brands boost demand for CBD retail space

5:00 AM Wednesday February 17, 2016 Colin Taylor

A number of global brands are looking to set up shop on Wellington’s Lambton Quay.

A growing number of retailers are vying for Kiwi buyer dollars and the demand remains strong for prime retail central city space, says Ed Donald, senior retail salesperson for Bayleys.

Clothing stores H&M and Zara have recently committed to Sylvia Park in Auckland and a number of other well-known international retailers are coming or are on the verge of coming to New Zealand,” Donald says.  

“In Wellington, Restaurant Jamie’s Italian, owned by celebrated chef Jamie Oliver, is coming to the city centre where it will operate from the ground floor of the historic Public Trust building on Lambton Quay; and David Jones is due to move into the former Kirkcaldie & Stains site in Lambton Quay this year. This will inject interest in the central city and could attract further global retail players.”

According to the latest Wellington retail survey by Bayleys Research, Topshop is believed to have confirmed a location on Lambton Quay and there has also been plenty of market speculation that Zara will be joining other clothing retailers on Lambton Quay.

“Other brands that are top of New Zealanders’ wish list would be Swedish furniture store IKEA, American warehouse club Costco and metro discount German supermarket chain Aldi - all of which are likely to follow,” says Donald.

He says the biggest driver for retailers coming to New Zealand is an existing commitment to Australia.

“It’s a natural connection to look at Australia and New Zealand as one market so if global brands are already trading in Australia with the overheads of a distribution centre and head office there, they need to grow their branches for critical mass within the Oceania region including into New Zealand. Further drivers are our current strong economy and growing net migration..”

Donald says international retailers need to be aware of prospective setbacks when looking for suitable property in New Zealand. “We have a limited market and often a wide distribution area within that market, resulting in a potentially high cost for retailers to move their goods around within the country. In addition, we don’t have the critical mass of other countries, which can be a barrier to many retailers.”

In most cases international retailers always try Auckland first as a test and if this works, they will often expand to Christchurch and Wellington at the same time before later moving into the provincial centres.

“However, location is entirely dependent on the retailer and their demographic. For example, a Costco will want one million people within a 30 minute drive time of each store, while car parts retailer Supercheap Auto might only want 20,000 people within a 30 minute drive time.”

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Clothing stores H&M and Zara have recently committed to Sylvia Park in Auckland.

Donald says when big international retailers come to New Zealand like IKEA this can act as an excellent traffic generator for local retailers. “A whole shopping centre could be built around a store such as IKEA and popular international retailers can also be a catalyst for other brands to move into an area. This may have happened with women’s clothing store Topshop which opened in Auckland’s Queen Street last year – possibly triggering the move of other brands into the CBD with Chanel and Tiffany and Co due to set up stores. Other global retailers will probably follow.”

Donald says there can also be downsides for local businesses, says Mr Donald.“All international retailers will bring a level of competition to the local market but often there is already ‘retail leakage’ before they even open outlets here. For example, before Topshop opened its Queen Street store, women were shopping from the online store - but now they are buying from Topshop’s bricks and mortar site that pays New Zealand rent and wages.”

The growing number of international retailers coming to New Zealand is also putting pressure on shopping centres which area proven model and traditionally have a good retail mix, Donald says.

“Shopping centres are remaining popular with shoppers having the convenience of a one-stop-shop. However, there is an increasing demand for individualism which has led to resurgence of high street-styled shopping. Examples of this are Queen Street, Britomart in downtown Auckland, Teed and Osborne Streets in Newmarket, Auckland, and Cuba St in Wellington.

“Some of the most prevalent examples of this need for ‘high street individuality’ are in the food and beverage industry, where there has been a backlash to franchised restaurants. Many consumers want something more edgy and original for a dining experience, and a good example is Auckland’s Depot where celebrated chef Al Brown is often visible and engages with diners.” 

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Ed Donald, Bayleys