Innovative retailers maximise returns

Foodservice and hospitality venues like cafes are performing strongly. Photo / Supplied

Innovative retailers and landlords are maximising returns from each square metre of their premises, through novel sub-leasing and space-sharing options, says Chris Beasleigh,Bayleys' national retail sales and leasing director.

Beasleigh, points to changing consumer habits and people's time-poor lifestyles as a root cause of such change.

He expects such trends to assist retailers and their landlords to develop businesses, without necessarily taking on the burden of a major fit-out.

"It's all about maximising the efficiency of floor space usage," he says.

"This can be achieved through co-jointly occupying premises — either simultaneously or concurrently.

"For co-existing businesses, the rationale is that — while an enterprise may be trading for eight-to-10 hours — the premises it occupies is technically open 24-hours a day. So why not make the most of those hours and fragment the rental accordingly.

"We've seen the likes of cafes cropping up within garden centres; DIY supply stores and gift shops — and florists cropping up during the day in bars. There have been tea shops opening up in hair-dressing salons, and vice-versa. Now watch out for 'hole-in-the wall' cafes to feature in self-operated laundromats; manicurists to run their beauty treatment services within the make-up section of department stores; mobile phone accessory displays featuring in menswear outlets; barbers bringing a chair and scissors to the corner of your local bar."

Among his predictions for other trends emerging in the retail property scene in 2019, Beasleigh thinks most sectors within retailing should continue to have a strong presence in the commercial property market.

He says the impact of on-line retailing on New Zealand's commercial and industrial property markets has been overly-exaggerated.

Supermarkets and grocery stores occupy a growth niche area. Photo / Supplied

"There's this misconception that on-line trading giant Amazon is dominating the world's retail scene.

"That's simply incorrect — Amazon's own reporting figures show that 93 per cent of its revenues come from the United States, Germany, Japan and the UK. That leaves seven per cent of its revenues coming from the rest of the world," Beasleigh points out.

"Yes, there are New Zealanders buying products on Amazon, but their spend as part of total retail transactions annually would be infinitesimally small.

"But convenience has, and always will be the key — whether that's the drive-through lane of the local fast food outlet, or the DIY store around the corner selling a replacement lightbulb.

"There are many things which on-line retailing simply can't compete with.

"We see it in New Zealand with Kmart — which is 'conveniently' open until midnight. That means when mum or dad get home from work, have cooked dinner, and put the kids to bed, one of them can then go out shopping for household essentials. It's a similar scenario with the big metropolitan supermarkets open until 10pm.

"Combine location convenience with personal service/customer knowledge, the whole retail 'experience', and quality of product, and it's a solid foundation for a successful retailing venture. That's the sort of business plan detail which landlords will increasingly be looking for from their tenants and potential future tenants.

The footprints of big, bulk retail stores have grown markedly. Photo / Supplied

Beasleigh's 2019 analysis on a sector-by-sector breakdown is:

• Supermarkets and grocery stores — these occupy a growth niche within the industrial property sector. "Bottom line, people will always need to eat and live … and therefore shop for food and household supplies. As the population grows and new suburbs emerge, so too does the supermarket and grocery store clientele. The bulk of this commercial property market is dominated by Foodstuffs and Progressive, while privately-owned corner stores serve local and neighbourhood needs."
• Household goods and home renovation/maintenance stores — people will always need to care for their dwellings — no matter whether they are owner/occupiers, landlords, or tenants. "So, lawnmowers, lightbulbs and light fittings, paint, and outdoor furniture, for example, will always be on the shopping list. Bunnings, Mega Mitre 10, and Carters have been the leaders in this sector across New Zealand with their large-scale, bulk, real estate footprints growing markedly since 2000," he says.
• Department stores — doing it tough overseas (in chains such as David Jones and Myer), while reporting a "mixed bag" of results in New Zealand, with predominantly drive-through domestic competition. Some brands are seeking more floor space — both in malls and in provincial 'big box' retailing hubs — while other chains are "treading water."
• Foodservice and hospitality venue — performing strongly. "Kiwis love going out for a cappuccino … or a family dinner. They love having a glass of wine or beer with friends, or grabbing a quick and easy take-away when pressed for time at home. "As a result, property in this sector is generally well tenanted," says Beasleigh. " Entities which struggle in this sector are generally a reflection of a poorly-run business rather than any indication of how the wider foodservice and hospitality sector is performing."