"I know a lot of people want to see Kmart in Napier but I am disappointed to see retail being dragged out of the CBD because our CBD is so important to us.
"I don't deny Wallace Developments the right to use the rules to their own advantage, but for me it is just disappointing for the CBD."
Turley & Co property strategy and valuation director Pat Turley said Kmart had been hunting for a Napier site for "a couple of years".
"It is surprising on one hand, but given Hawke's Bay's new-found economic momentum, not totally," he said of the development.
The proposed building will be more than 5000 sq m. Mr Turley said neighbouring business Mitre 10 Mega Napier had a 9,600 sq m floor area, Kmart Hastings had 5,600 sq m and The Warehouse Hastings 6,400 sq m.
The Napier land, on the corner of Prebensen Drive and Ford Rd, is 15,697 sq m and zoned Large Format Retail. When sold in 2015 the developer proposed a cluster of seven retail tenancies 500 to 1000 sq m, he said.
Today's "phenomenon" was "decades in the making" with traditional shops worldwide giving way to large-format destination retailers, which increasingly supported online shopping.
Turley valuer Kurt Richards said Kmart would "fit pretty well with Mitre 10 Mega" and increase the popularity of Prebensen Drive as a retail precinct.
Mr Walker said nothing had been signed for the development "so there is no story as yet".
"There are some hoops we have to jump through before we know it is actually happening."
Hastings Kmart has been one of the top-performing Kmarts in Australaisia and Hawke's Bay Today understands recently began a longer-than-normal lease.
Commercial property in Napier's CBD is also under pressure from the growth of Ahuriri for office accommodation, but Mr Dalton said Ahuriri and Napier CBD "really complement each other".
