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Land supply issues and u-turn on business rating policy

24 July 2014

Speech notes: Auckland Councillor Cameron Brewer - New Zealand Council of Shopping Centres and Property Council New Zealand’s Retail Conference 2014, SkyCity Convention Centre, Auckland, 24 July 2014

Retailers face land supply issues and u-turn on business rating policy

Welcome to Auckland. It’s great to be here this morning at the New Zealand Council of Shopping Centres and Property Council’s 2014 Retail Conference aimed at investors, owners and managers of retail property.

Recently we have seen some strong growth around Auckland's retail sector.

In fact retail spending in real terms increased by 5.1% in the March quarter when compared to the same quarter last year. According to our economists, Auckland’s retail spending has been boosted by strong net migration numbers and solid growth in guest nights helped by some of the significant events Auckland now hosts.

In saying that, while we’re getting some lift after many difficult years in retail, I know with my days in the Newmarket Business Association, the experience on the shop floor can be very different.

And of course while spending may be up, so too are rates, rents and fixed regulatory costs. The retail sector is not an easy one, but it’s a massive contributor to New Zealand’s economy and indeed Auckland’s, with retail employment growth set to increase by at least 26% in the next 30 years. Be assured the internet will not kill the retail star!

As many of you will be aware, Auckland faces huge growth with 700,000 more residents expected within the next 30 years to take us to over two million Aucklanders.

Demand for retail will grow substantially during this time, not only to meet the needs of anticipated growth in households but also the forecast growth in business and tourism.

Latest figures show that Auckland’s current 3.9 million square metres of retail floor space will increase to 5.7 million meters by 2041.

With that insatiable demand in mind some of us around the council table remain concerned and critical over the inadequate provision of business land in Auckland – both existing urban and future greenfields. Also concerned are the likes of Colliers International, Urbis, and the Property Council with its April press statement and research headed ‘Not enough business land in Auckland’.

One of the biggest revelations recently is that of the business land currently available in urban Auckland, a staggering 60% of that available land comes in less than 1,000 square metre lots – that’s less than ¼ acre. That’s a killer for large format retailers and shopping centre developers.

No wonder The Warehouse Group wasted no time in taking over The Good Guys Auckland’s store sites, following The Good Guys recent decision to exit New Zealand.

Under the current proposed Unitary Plan we are going to be short of land for big retail development as much of its emphasis is put into growing and building our town and metropolitan centres as self-sustaining places to live, work and shop.

The Mayor talks about Auckland’s 100 villages and this factor is without a doubt one of Auckland’s unique and attractive characteristics.

Let’s not forget that Auckland’s CBD only hosts a fraction of jobs and shops. In fact it hosts just 7% of Auckland’s retail floor space. The strength of Auckland’s retail is in fact outside the central city, with council now overseeing 48 business associations or Business Improvement Districts.

In the past some of our business associations were in war against mall developments and the traditional retail sector was feeling incredibly threatened. For example, twenty five years ago Two Double Seven was apparently going to destroy Newmarket strip shopping, and more recently Sylvia Park was set to suck the lifeblood out of the likes of Ellerslie village.

But the sky hasn’t fallen in. Town centres have focused on their strengths - for Newmarket that became fashion and high end retail and for Ellerslie that meant building a well-balanced village that serves the daily needs of locals.

Under the proposed Unitary Plan the news for retailers in our town and metropolitan centres is mostly good, as our planners are pushing future townhouse and apartment development, as well as commercial office development, to be in and around these centres. This is where much of our residential intensification is going to happen, as we regenerate and strengthen our town centres housing with many more people in close proximity.

It is important that while planners are set to help retailers in Auckland’s town centres by bringing more shoppers and consumers to their doorsteps, that we also ensure our large format and shopping centre retailers are equally accommodated so they too can continue to provide goods, services and jobs. They need brownfields and greenfields land, and they need less council costs not more.

Finally, Auckland Council is now working on its 10-year budget, or Long Term Plan, with some serious cuts and policy changes to be made if we are to keep residential rate increases down.

Of concern to many is that the Mayor will be looking at shifting more of the rates burden back onto business.

He could potentially do this by reneging on council’s 2012 decision to lower the business differential every year over 10 years. Not only would this be a broken promise but it would add to retailers fixed costs. So watch that, and if you’re in Auckland be prepared to fight it next year.

Again, best wishes for the conference. Thank you.

ENDS

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