Major projects provide optimism in New Zealand Large Format Retail space

Ongoing large format retail projects across New Zealand are providing the sector with optimism that a period of growth is on the horizon.

The Maki Centre at Westgate in Auckland, that is being developed by the New Zealand Retail Property Group, is expected to offer approximately 18,000sq m of floor space and is located between New Zealand’s only Costco and Mitre 10 Mega. The development is set to begin construction and will feature the likes of Baby Bunting, JB Hi-Fi, Supercheap Auto, and Hunting & Fishing New Zealand.

Ikea’s long-awaited arrival to New Zealand will see the furniture retailer opening an approximately 34,000sq m store in Mount Wellington in late 2025. Kiwi Property are looking to develop approximately 6,500sq m of additional large format retail space adjacent to Ikea.

Further down the North Island, Bay of Plenty is home to multiple exciting projects, including another stage of development at Tauranga Crossing that will include Harvey Norman and BedsRUs, while Bay Central Shopping Centre is also set for a 3,000sq m extension.

The Sands in Papamoa, a prominent development that is years in the making and has considerable support from the Tauranga City Council, has a proposed 26,000sq m large format retail component that will form part of the wider development.

The South Island also has notable projects in motion, including Nelson Junction, an 11,000sq m centre that has largely been leased by Colliers and is due for completion early next year.

Westwood in Blenheim, already anchored by Pak’nSave, Kmart, and Bunnings with a new Harvey Norman under construction, has also progressed to the final stage with approximately 5,000sq m of large format retail space due for completion early 2025.

In Canterbury, consent was granted earlier this year for a 24,000sq m extension to Homebase shopping centre that will include a new supermarket and department store and make it the biggest large format retail site in Christchurch. Also in Christchurch, Spotlight will open their latest store at the Northwood Supa Centre.

Leroy Wolland, National Director of Large Format Retail at Colliers, says while these projects will provide confidence to the sector, New Zealand’s retail environment has experienced challenges during the past year.

“Inflation has put pressure on consumers against the backdrop of rising mortgage and interest rates, which have impacted disposable incomes.”

Despite those challenges, spending in the retail industries in New Zealand increased in August by 0.7 per cent compared to July, based on information from Stats NZ who track electronic spending data.

Spending data from the Australia Bureau of Statistics noted in May that household spending on discretionary goods and services was 0.6 per cent lower than May 2022 with a particular drop in furnishings and household equipment.

Wolland says Kiwi retailers have experienced an overall dip in sales figures during the past year and while that may sound negative, centres with strong fundamentals are continuing to see positive leasing enquiries.

“The development pipeline for large format retail sites across the country remains steady and it is encouraging to see continued demand for space in areas with continued population growth such as West Auckland and Bay of Plenty.

“Colliers has brokered leases for a handful of new-to-market retailers that will enter New Zealand later this year or early in 2024 and we are excited to watch their expansion. We are also pleased to see high-profile retailers such as JB Hi-Fi and Chemist Warehouse signalling their intentions to increase their footprints.”

There have also been discussions in the New Zealand market around perceived anti-competitive behaviour of retailers with the supermarket sector receiving scrutiny and a Grocery Commissioner was recently to improve competition in the sector.

Meanwhile, a Tauranga property development company aligned to a Mitre 10 Mega franchise in Tauranga was issued a $500,000 penalty for using an anti-competitive land covenant.

“Whether these measures will promote further competition in the retail sector in New Zealand remains to be seen but anti-competitive behaviour is being closely watched by regulators and could have wider implications from a lease perspective in terms of exclusivity and radius clause provisions,” Wolland says.