Archive for May, 2013

The future of Main Street retail?

Location location location was the old maxim for successful retail in days of old but what of the new era in post GFC 2013? Aren’t the fastest growing retail brands all located the cloud, wherever that is? It’s true that by turnover the most popular online stores used by kiwis are Air New Zealand, Trademe followed by Amazon. Several New Zealand sites like Fishpond and Torpedo7 have a huge Australasian following but the point is that while New Zealand business are prospering and participating in the online global economy, all these noted here are taking business away from traditional main street retailers using commercial real estate to operate.

A recent US survey claims that 45% of respondents in Generation Y also known as the ‘Millenials’ spend more than one hour per day shopping online! It astounds me they have so much spare time, no wonder the traditional TV stations are trending downwards. The gist of this particular report was that big shopping centres in the US were remodelling to provide more food and entertainment options as 25% of respondents of the same survey say they dine out more than once a week.

Anyone walking Wellington streets can observe a good number of ‘For Lease’ signs littered on empty windows in virtually every street block. It shows e-tailers are winning, right? Reports from Retail Trade Surveys published by Statistics New Zealand suggest pretty modest increases in retail spending for 2011-2012 of just over 1% no doubt accounting for a similar movement with inflation.

Yet many brave entrepreneurs open shops against all the odds and have a go. Yesterday I saw a new hair salon with a coffee bar, and a bicycle shop with a full café inside its doors. New ideas come and go, I have leased shops to some who have succeeded and some have faltered and even failed. Maybe that’s why so many, particularly the younger ones,are prepared to try new things, if only on short term two or three year leases.

I have recently become involved with marketing a small retail site of about 50 m2 with a fairly full asking rent and I am astounded how many enquiries I have received on it, within a week we got a good offer on it and now we have three other parties ready to pounce should the first guy fall over.

So this made me wonder about the long term vacancies and whether they would lease if the rent was brought back, or is this a sign of a larger structural issue. For example, in Lower Hutt’s deserted (or is it devastated) High Street and Queens Drive, where so many empty shops are bigger than 150 m2 you could well ask if they would be more attractive and therefore lease-able if they were smaller.

Recent commentaries from PWC on online retailing predict that in NZ online retailing is currently worth $3.2 billion and likely to increase by 14.9% compounding every year. Some 1.9 million kiwis spend on average $1,659 on online purchases and this is turnover local retailers would have traditionally enjoyed.

But against this online tsunami I recently leased a large site in Willis Street which I can recall has seen the downfall of at least four or five previous tenants. I was able to encourage one brave soul to make an offer at two thirds the asking rental set by a valuation. Fortunately he was met with a pragmatic owner prepared to accept far less than what was once considered ‘value’ at a level which we all hope will enable the new business to survive.

In closing it’s true that some are prepared to pay up to $3,000 per m2 for Lambton Quay and $1,500 per m2 or more for Willis Street. It is also true that a cluster of vacancies are of very similar size and price ranges. Yet I am convinced there are keen and brave entrepreneurs out there willing to give it a go and retail not e-tail. Maybe landlords aren’t going to thank me for this opinion; but if your shop has been vacant for more than a few months or even years, then think about changing the size and shape if you can, you may have to render areas past 10-15 metres depth as storage space or garage. And now living really dangerously you may have to throw away your old valuations and consider why the last tenant left and if they survived, then ask a few prospective tenants what can they really want and can afford to pay?

May 24 2013 | Uncategorized | No Comments »