KEY POINTS:
As retailers report a surprisingly strong Christmas, with electronic sales during the festive week up 4 per cent on last year, according to Paymark, the owners of New Zealand's main shopping centre have some bullish news for the market.
AMP Property Portfolio has stepped up its investment in
shopping centres with a $368 million deal announced on Christmas Eve.
It has bought the remaining half equity shares in three Auckland shopping centres - Botany Town Centre, LynnMall and Manukau Supa Centa - from Australian property company, the Stockland Trust Group.
Westfield NZ director Justin Lynch, meanwhile, says two of its shopping centres, Westfield Pakuranga and Glenfield, are no longer on the market.
The decision, earlier this year, to ask for expressions of interest in the two centres was the result of a global review by the Westfield Group to raise some equity at the beginning of the year, says Lynch. With close to $10 billion raised through other international asset sales, the divestment of the Auckland centres is no longer needed.
After spending $1b over the past 10 years in New Zealand, the shopping centre owner plans to spend a further $500m in the next five years, says Lynch. Now Westfield Albany is up and running, Westfield will next year be turning its attention to expanding 277 in Newmarket and Riccarton in Christchurch.
Westfield has consent for a development at 277, which could include a new department store and an external refurbishment of the main building, as well as a reconfiguration of the existing shops and some new outlets. The work is planned and proposed to start next year, subject to confirmation.
Another trend set to continue will be more Australian retailers streaming over to Kiwi shopping centres.
"I think the NZ market is being viewed by Australian retailers as one of the next growth markets for them, similar to them going to America, Europe or the UK," says Lynch.
Stephen Costley, general manager of AMP Property Portfolio, sees opportunities for Australian retailers here.
"For a listed retail [operator]... many of them have taken the opportunity in the past 12 months of the Auckland market to come to New Zealand," he says. According to the statistics in floor- space to population, parts of New Zealand are still under-shopped, says Costley. Botany Town Centre is one of these areas and it is forecast to have greater than average growth.
"We look for two things - demand for retail space and population growth," he says.
Following its investment announcement, AMP is moving ahead with plans for a 5500sq m extension at Botany Town centre, taking it from 56,200sq m to 61,000sq m, and about 30 new retailers and more carparking.
Next year, with little sign of interest rates easing, AMP will take care to provide a "contemporary retail offer that does not over-deliver."
As the year draws to an end, how does 2007 stack up for retail? The newer shopping centres did better than others, it seems. The 100 retailers that have been at Sylvia Park for more than a year are showing almost 20 per cent like-for-like growth in September and that figure has increased further in the past three months, says Angus McNaughton, chief executive of Kiwi Income Property Trust.
While the 2007 retail market had about 5 per cent growth, there is a lot of uncertainty about next year, says John Albertson chief executive of the New Zealand Re- tailers' Association.
"Election years create uncertainty in people's minds," he says. "Probably the biggest thing dom- inating the retail market was increas- ingly competitive prices being offered, a sense of high competition," adds Albertson. Retailers will have to be managing their margins very well.
The big retail players, meanwhile, are looking to increase in size through acquisition in 2008. By the end of the year, The Warehouse may well end up in different hands.
Meanwhile, earlier in December, the Farmers Trading Company bought Stevens Homeware and EziBuy bought Max Fashions.
Economists gazing into their crystal balls for 2008 are unable to give the retail sector much assurance and reflected that 2007 had been better than expected.
ANZ chief economist, Cameron Bagrie says 2007 was a pretty solid year, albeit a game of two halves - a very strong first half and then a more faltering second thanks to four consecutive interest rate increases. "The fourth interest hike was like a twist of the knife," he says. He agrees with Coriolis retail analyst Tim Morris that the bottom fell out of the market for many retailers in August.
"The bottom end was hurting more than the top end. If you go to Newmarket there seems to be a shopping frenzy going on," says Morris.
But in South Auckland the picture is different.
Despite interest rates rises and currency fluctuations. "You've got to take your hat off to New Zealanders. They held up rather well," says Bagrie.
He predicts next year will be more subdued but he says it is difficult to get too downbeat with a lolly scramble to look forward to from the Government in the form of tax cuts.
What Reserve Bank Governor Alan Bollard would like to see is New Zealanders getting into the habit of earning more than they are spending.
Rather than being worried about the election, or interest rates, Bagrie's concern for next year lies in what is happening overseas, where there is a lot of volatility. "A lot of people are talking about what's going on around the world and it's more than the sub-prime, it's the generic repricing of risk. New Zealand is a very heavily indebted nation, reliant on offshore pricing of risk."
There will be a period of reducing growth, less spending on retail and houses and consolidation. "In an old David Lange saying, the Reserve Bank would like us to have a cup of tea."
