The changing face of retail and its commercial property spin-offs

With consumers increasingly holding the power in the retail chain, traditional retail shopping precincts are changing their offerings to reflect evolving expectations and demands of an astute buying audience.

Bayleys’ national commercial property director, John Church, says commercial property investors and developers are hungry for information about the retail environment and ways to ensure their investments will remain relevant in a changing consumer-driven world.

“Due to consumer demand for comparative shopping experiences, the retail strip sector has already been a casualty of the wider shopping centre trend,” Mr Church said.

“But, even within the mall/neighbourhood shopping centre segment, there is enhanced competition to keep abreast of consumer dynamics and investors are eyeing up opportunities to be part of innovative retail complexes.

“We have witnessed some fierce competition in our auction rooms for multi units within sophisticated neighbourhood shopping precincts where a mix of retail, hospitality and service providers are clustering to leverage off foot traffic and captive local markets.”

Mr Church says the retail sector is a moving target and owners of retail property need to be awake to the changing sector and ways to make their portfolios evolve.

“With the convenience of online shopping always sitting on their proverbial shoulder, retailers are being kept on their toes to stay pertinent in what is now a virtual global shopping environment.

“One of the main trends identified by global cloud-based point of sale software company Vend in the latest edition of Bayleys’ Total Property magazine is that stores with omni-channel strategies will continue to thrive,” Mr Church said. 

Some owners of retail commercial property are spreading their risk by also investing in warehouses given the need for the storage/distribution logistics that the new omni-channel shopping scenario demands.

“When combining a physical/e-store presence in the market, storage capability is often being fulfilled with off-site warehousing property.”

Mr Church said Bayleys expects demand for well-located, smartly presented retail property to remain buoyant given evidence that more e-commerce sites will set up ‘bricks and mortar’ stores to capture the optimal consumer market.

“There are identified benefits in cementing a digital and a physical presence.”

With two of the biggest identified barriers to online shopping being the cost of delivery and inconvenient delivery times, the world of ‘click and collect’ is evolving to deliver on the convenience front.

Mr Church says New Zealand is likely to follow UK and US trends for lockers and third party stores to pop up as alternative collection points for goods ordered and paid for online.

“Whether our relatively limited population base would make this a viable commercial option remains to be seen but it is good to have that sort of knowledge on our commercial property radars.”

Mr Church said the recent announcement by NZ Post that it will further streamline its operational store network will change the face of many neighbourhood shopping centres.

“The traditional post office has often anchored many of our local shopping centres. However, the way we communicate, bank, and shop have drastically changed and so we will see a change in the commercial property landscape as a result.”

The recently released BNZ Online Retail Sales Report shows total online retail spending was up 9% in February 2015 on February 2014 with online purchases via domestic merchants up 6% on spending levels a year earlier, and spending via international sites up 13%.

Major shopping centre owners and developers have to use sophisticated means – including engaging consultants and researchers – to establish what the most desirable mix of retailers and service providers for a savvy consumer audience will be.

Mr Church says Bayleys is watching what the big players are doing carefully. Retail and societal trends are influencing leasing decisions, and “knowledge is king.”

“The mixed-use shopping centre concept is an escalating trend in Australia, and we are seeing evidence of that here in New Zealand, too,” Mr Church says.

“Food and beverage is the fastest-growing retail category in New Zealand and, within that, we are seeing the changing face of food courts.

“Bayleys is currently involved in the leasing of an upmarket single-site, laneway-styled dining precinct in the refurbished former BNZ building at 125 Queen St, Auckland called Queen’s Rise.

“The hybrid dining environment will offer a diverse range of eateries and restaurants in an edgy dining environment that will redefine the traditional food court concept.

“The building is already home to a corporate gym, sophisticated childcare facilities and a New World Metro [inner city format] supermarket and now it will house Queen’s Rise.

“Leasing of the 13 tenancies of varying sizes is under way, with food and beverage operators scheduled to take up residency towards the end of this year.”

Another notable trend in the New Zealand retail environment is luxury global brand retailers cementing a physical presence in the major cities.

Mr Church says that although Auckland can now boast Top Shop and Top Man, Prada, Gucci, Dior, Louis Vuitton and Swarovski, New Zealand still lags far behind Australia.

“The Deloitte 2015 Global Powers of Retailing report shows 15% of the world’s top 250 retailers operate in Australia and only an estimated 5% in New Zealand. 

“Word on the street is that Zara and Tiffany are looking for space, while Apple and Google are also on the radar.”

Jody Robb writes for Bayleys Real Estate