Large Format Retail performing strongly in New Zealand

Large Format Retail has been a bright spot in the New Zealand property market this year.

Despite a challenging retail environment, new developments are continuing to take shape and assets are being transacted as buyers are drawn to the prospect of acquiring properties with strong underlying investment fundamentals.

While economic data in New Zealand points to subdued trading conditions, the recent Retail Radar report from Retail NZ highlighted rising confidence among retailers.

Their quarterly survey that covered April to June showed 69 per cent of retailers were confident their business would survive the next 12 months, up from 57 per cent a year earlier. Many retailers also suggested their sales figures were likely to increase as the year progressed.

Leroy Wolland, National Director of Large Format Retail at Colliers, says the retail sector remains resilient with development activity continuing across New Zealand.

“Well-located sites that can attract the right mix of retail tenancies are still a drawcard for shoppers and many of these operators take a long-term view of the economy and believe it will rebound,” Wolland says.

“With interest rates continuing to fall, money will eventually flow to retailers as buyers will have more disposable income.”

Wolland has also leased or is leasing a collection of retail opportunities around the country.

In West Auckland, The Maki Centre recently opened, and this development includes a collection of high-profile brands such as Hunting & Fishing New Zealand, Supercheap Auto, JB Hi-Fi, Baby Bunting, Nutrition Warehouse, Petstock, Early Settler, and BedsRUs. It sits within the Westgate town centre, a hugely popular shopping centre that draws customers from across the Auckland region.

In the Auckland city fringe suburb of Newmarket, existing space that sits next to The Warehouse is being refurbished, offering prospective tenants the chance to secure a premises near one of New Zealand’s most recognisable retail brands. The refurbishments are expected to be completed later this year meaning a new tenant could be trading by Christmas.

In the South Island, a property in Richmond that was formerly home to a fruit and vegetable retail business is being reconfigured by a local developer to accommodate three tenancies.

The facility has potential to be utilised in a range of different ways and may suit trade retailers, a retail showroom, or some Large Format Retail tenants.

A development in Papamoa in Bay of Plenty, which is being overseen by Tinline Property, is taking shape within the thriving Papamoa Plaza precinct and will serve an area that is rapidly growing but is starved of Large Format Retail options.

A nationally recognised homeware retailer and national pet retailer have secured space in the development with a handful of tenancies still available.

Interest in the expansion of the Homebase Large Format Retail centre in Christchurch is very strong. It will be approximately 40,000m2 upon completion mid 2026, with an extension to the existing Bunnings, Repco, Mountain Warehouse, local Large Format Retail homewares retailer Bed Bath Beyond committed, with negotiations advanced with several other major Large Format Retail brands.

From a sales perspective, investors remain attracted to the Large Format Retail sector given the long-term leases held by the tenants. These properties, such as supermarkets, large-scale hardware stores, furniture outlets, and discount chains are often essential service businesses and are low-maintenance assets.

The Colliers New Zealand Capital Markets team has transacted a range of notable Large Format Retail assets this year, including the $43 million sale of Bunnings in New Lynn in West Auckland, Woolworths Westgate for $20.16 million, and the FreshChoice supermarket in Ōmokoroa in Bay of Plenty.

In Tauranga, they sold 262 – 266 Cameron Road that is tenanted by Noel Leeming, Chemist Warehouse, and Animates for $18.66 million at a 6.3 per cent yield and a Woolworths in the Auckland suburb of St Johns for $22.955 sqm, which equated to an approximate yield of 5.8%.

Blair Peterken, Director of Capital Markets at Colliers, says these properties require low levels of management intensity and have caught the attention of high-net-worth private buyers and listed entities.

“With the ongoing decline in our Official Cash Rate and term deposit returns from major banks falling, we’re seeing strong interest from investors in long-leased Large Format Retail assets, including notable demand from Australia.”