Retailers quick or dead in tough sector

Photo / Bay of Plenty Times

Supermarkets, hardware chains, fast-food outlets, IT stores and gyms are leading what little retail sector expansion is taking place.

Chris Dibble, Jones Lang LaSalle's research and consulting manager, told yesterday's Property Council retail conference in Auckland that these were the growing businesses in the difficult sector.

But he revealed the huge problems facing other parts of retailing, saying bars, restaurants and cafes were struggling and many faced even tougher times ahead.

Only the most successful businesses in this sector would remain, he predicted.

Progressive, Foodstuffs, Bunnings, Mitre 10, McDonald's, Wendy's and Anytime Fitness were some of the big success stories in retailing, which was dominated by a tough economic climate, constrained spending and a difficult sales environment, he said.

2degrees had signalled its intention to have its own-brand stores operating soon and could have six shops in Auckland, he said.

"Bunnings and Mitre 10 will continue to expand. The old adage that bigger is better is relevant here," he said, noting Bunnings' success in gaining resource consent to build on its 3M North Shore site beside a Mitre 10 Mega.

Signals were that retailing discounter Aldi was interested in New Zealand and had registered its domain name and trademark. He said some people at the conference were probably involved with that move.

Fast-food remained a major success story: McDonald's was spending $100 million and with 10 new outlets regarded New Zealand as a growth market.

But he noted the demise of the Red Rooster fast food chain in New Zealand, saying not every business was a success in the sector.

He cited what he called the "lonely developer horizon", where mall and shop owners and managers were not building. They were instead looking to refurbish or expand existing properties.

"Building consents remain depressed. Mezzanine debt has gone and the banks are more reluctant than they were a few years ago."

Statistics NZ data showed building consents issued in May for the shops, restaurants and taverns sector down 39.6 per cent compared with last May.

Hopeful signs were emerging from Australia that deals were happening again, Dibble said, particularly retail property sales of about $2 billion so far this year.

Australians might begin looking more to New Zealand property deals but they would concentrate on yields, he said.

The Property Council was working with Inland Revenue to clarify whether building fixtures and fittings would still get tax breaks.

Losing tax deductions for depreciation on buildings and rising GST were negative effects he cited in the real estate sector.

"Bulk retailing is neither hot or not but it is changing," he said, mentioning the expansion of the Cotton On business.

About 150 restaurants and cafes had shut in the past two years. Trade Me remained a big influence on retailing as New Zealanders hunted for bargains. The internet would continue to be a big force in the sector with about 5000 people wanting IKEA to come here.

"The recovery is under way but it's still going to be hard."

Dibble predicted annual retail rent rises in Auckland of 1.5 per cent and in Wellington of 3 per cent.

"The big questions consumers are asking is: do I save or do I spend? The message from the Government is to save."

Boom or bust

HOT
* Supermarkets
* Hardware/DIY stores
* Fast food outlets
* Gyms & fitness centres
* IT/technology shops

NOT
* Cafes
* Bars
* Restaurants

IN BETWEEN
* Bulk retail
* Clothing

Source: Jones Lang LaSalle research & consulting