The retail market has been fractured into winners and losers in the wake of COVID-19’s disruptive presence.
The recently completed Ormiston Town Centre is among a variety of retail developments to be opened this year
Writing in the introduction to Bayleys’ latest Talking Shop, featuring retail leasing opportunities from around New Zealand, Bayleys’ national retail director Chris Beasleigh says some sub-sectors of the retail landscape have had an exceptional run.
“Others have faltered, regrouped and emerged stronger. Some will not recover. As specialists in the retail property sales and leasing market, we acknowledge that for many retail businesses – in particular those aligned with hospitality, travel, tourism and CBD retail – the 2020/2021 financial year was more than tough. It was punishing, and for many, the pain continues.
“For all the talk about pivoting, being adaptable and thinking outside the usual boxes, reality has bitten hard for a lot of New Zealand retail businesses.”
Earlier this year, some normality was returning, Beasleigh says, with hopes pinned on the travel bubble with Australia to boost some of our more affected retail and hospitality sub-sectors.
“Sadly, COVID’s long tail in the form of the tricky Delta variant is proving that we can’t get too comfortable. Following on from 2020’s challenges, this is naturally impacting the retail sector in all its guises quite significantly as (yet again) business owners grapple with changing protocols and health-related mandates. The breathe, pivot and adapt mentality will be with us all for some time yet.”
Beasleigh says the first half of 2021 was one of “record busyness” for Bayleys’ retail teams. Operators looking for new or additional premises recognised there was opportunity in the marketplace to secure good deals on the back of freed up space.
He says there remains very strong demand for large format and service retail space. There is little to no vacancy in the bulk retail market and minimal inventory for service retailers like nail salons and hairdressers.
“However, the fashion sector has struggled due to consumers’ ongoing love affair with online shopping, which only strengthened during the height of New Zealand’s pandemic response. Bricks and mortar apparel stores are having to rethink their offerings – both from a stock angle and an added-value/shopping experience stance.
“Large-format hospitality has also had a difficult time of it, and this has necessitated a rethink of what optimal space, food offerings and staffing levels look like – with closed borders only adding to the headaches around staff recruitment and retention.”
On a positive note, Beasleigh says the pandemic disruptor has largely brought landlords and tenants to a new and better understanding,. Landlords now have a better appreciation of how their tenants’ businesses operate and occupiers can see things more clearly from a landlord’s perspective. “Leases now reflect greater transparency, have some flexibility and include special pandemic-related clauses.”
Bayleys was involved in 393 retail leasing transactions in the March 31, 2021 financial year encompassing 72,064sqm of space and concluded $423.1 million of retail sales.
Despite COVID’s disruptions, significant new retail footprint has come onto the leasing market in the last year or so and there’s more to come, says Beasleigh. Examples include Commercial Bay in Auckland’s CBD which opened last year, Ormiston Town Centre’s opening in south-east Auckland in March. Various retail precincts are either planned or underway in the regions.
Likewise, neighbourhood hubs and local shopping centres that are aligned with areas of emerging and identified population growth are attracting occupier attention. “Eyes are turning and wallets are opening at Westgate, Kumeu, Drury, Flat Bush, Pukekohe, Silverdale and other regional centres where retail investment and development is making a mark – and where infrastructural improvements are helping facilitate business,” says Beasleigh.
“Bold moves in the face of global uncertainty are to be applauded.”