Business is brighter in the suburbs

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Free, abundant customer parking and competitive lease incentives have resulted in growing interest in surburban retail space in Tauranga and Mt Maunganui.

According to Colliers International's annual retail property report, the shift to suburban centres has been a factor in increasing vacant retail space in downtown Tauranga.

Retail businesses there reported largely flat sales over the past 12 months while Paymark figures showed the Bay of Plenty region experienced a 3 per cent increase in electronic retail spending.

Yields for retail properties in Tauranga and Mt Maunganui had remained stable and were expected to firm in the near future, the Colliers report said.<inline type="poll" id="6417" align="outside"/>

During the past year, there had been growing interest from tenants in the suburban retail centres of Tauranga and Mt Maunganui, primarily due to free and abundant carparking for customers and competitive lease incentives, especially discounted rentals.

The consequent reduction in demand for Tauranga CBD retail property this year had caused a significant increase in vacancies along the main shopping strip and there had been a shift in tenants moving out of older buildings in the CBD. Overall rentals were anticipated to remain steady in the next 12 months.

Retail spending was showing some signs of growth, developments were being planned and built, and vacancy levels in the best shopping precincts were stable or falling, Colliers said. However, any talk of recovery had to be tempered with a degree of caution - as it would be patchy.

Most centres around the country expected stable rents and values, which was better than the generally declining picture of the past two to three years, but not encouraging enough to trigger new retail supply around the country. For that to happen there needed to be population growth and/or income-per-capita growth, Colliers said.

Nationally, retail property returns had been rising.

The latest investment index from the Property Council of New Zealand and Investment Property Databank (PCNZ/IPD) recorded a total return of 10.6 per cent for the retail sector in the year to June 2012, up 6.4 per cent from June 2011. The total return comprises 8.1 per cent income return and 2.4 per cent capital return.

By sectors, retail performed better than office, which is sitting at 7 per cent. Retail was also the only primary sector to record a positive capital return, 2.4 per cent for the quarter ending June 2012.

Both by volume and value, New Zealand retail property sales over $2million declined 45 per cent in 2011, after reaching a three-year high in 2010.

The total sales volume under $2million in 2011 was nearly half of the peak in 2007.

The Colliers report said investors would remain cautious towards investment opportunities in Christchurch until there was more evidence of activity.

Overall, the performance of retail property investment was expected to improve somewhat with yields tightening marginally over the next year, the report said.

While the economic outlook was slowly brightening, some clouds remained over the retail sector.

If retailers weren't thriving, investors weren't thriving either, the Colliers report said.

Online shopping was increasing and secondary precincts were continuing to struggle.

On the other hand prime precinct vacancy remained low.

In areas experiencing population growth, the resultant increased demand for retail goods would lead to rental increases over time.

According to the latest ANZ-Roy Morgan Consumer Confidence survey, New Zealand consumer confidence has rebounded from a marginal drop in June, up 6.1 points to 111.9 in the year to September 2012.

The overall trend remained weak, it showed, as consumers still felt financially worse off compared with a year ago.

However, they remained optimistic about their financial conditions for the year ahead.

By regions, Wellington had recorded the highest improvement in confidence, jumping almost 18 points from 105.7 in June 2012 to a region-wide high of 118.0 in September 2012.

Consumer confidence in Canterbury region increased 4.0 points to 116.0, while the other regions all experienced a drop in confidence.

The value of seasonally adjusted total retail sales had increased 4.8 per cent in the June 2012 quarter compared with the corresponding quarter last year. Eleven of 15 industries surveyed had reported an increase in retail sales volumes this quarter, motor vehicle and parts retailing contributing the most, rising by 7.3 per cent compared with the March 2012 quarter. The largest decline was fuel retailing, which dropped by 2.6 per cent.

The Colliers report said despite fragile sentiment in Australia, the New Zealand retail market outlook remained positive, with economic growth expected to be steady, unemployment expected to reduce and inflation likely to be well controlled.


Mt Maunganui/Tauranga key points


Yields have remained stable and are expected to firm.

Suburban retail centres become more popular.

Rentals expected to remain steady

- Bay of Plenty Times

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