‘Amazon-proofing’ retail destinations
The Fortieth & Hurstmere dining lane in Takapuna, Auckland, is a good example of how developers can add value to strip retail properties. Photo / Supplied
Shopping strips in prime locations with plenty of dining and entertainment options are best placed to withstand Amazon’s arrival Down Under, says Bayleys new head of retail, Chris Beasleigh.
Amazon’s launch in Australia at the end of last year has put local bricks and mortar retailers on notice, with many analysts predicting the online giant’s presence in the region will accelerate online shopping growth.
The company spent much of last year collecting price points on everything in the market and researching regional shopping habits.
It plans to roll out its full set of offerings for Australasian customers, including Amazon Prime and its food service AmazonFresh.
“Regardless of whether or not Amazon establishes here, its ability to disrupt our market shouldn't be underestimated,” says Beasleigh.
“Smarter bricks and mortar retailers will evolve into a blend of ‘grab it now’ and ‘have it delivered’ outlets, while smart digital retailers will invest in physical stores.”
Beasleigh, who joined Bayleys in December, still sees immense value in strip retail; what’s more he considers some strip retail locations around New Zealand to be “Amazon-proof”.
“It’s clear Kiwis still like to shop. Latest Statistics NZ figures shows Kiwis spent almost $90 billion last year and, although a percentage of that sum was from online sales, the vast majority came from traditional retail outlets,” he says.
“But the object of the retail game now isn’t simply sales: large investors in retail property want to turn their assets into destinations that people come to with their family and friends for a day out. Shopping is almost like a by-product of that process, rather than the purpose of being there.”
According to Beasleigh, concerned commercial property investors should resist pressure to pass over the retail sector or withdraw from it.
“Although other sectors, such as industrial, are more popular with buyers right now, strip retail still offers value – especially to those who can anticipate or quickly adapt to market trends,” he says.
“E-commerce will have minimal impact on retail strips that offer experiences and services that can’t be easily replicated online and attract high foot traffic on both weekdays and weekends.”
Notable examples of “Amazon-proof” retail strips, include:
- Lower Queen Street, in Auckland, which is home to high-end luxury goods stores such as Prada and Louis Vuitton and the under construction Commercial Bay retail and dining lanes
- Lambton Quay and Willis Street, in Wellington, which is home to David Jones and Beauty Bliss; and
- Cashel Street, in Christchurch, which boasts H&M and the newly opened retail hub, The Crossing.
“Demand for real estate in these locations is high, with rental rates of $4000 per square metre not unusual,” Beasleigh says.
“But thriving retail opportunities can be found elsewhere. The Fortieth & Hurstmere dining lane in Takapuna, Auckland, is a good example of how developers can add value to strip retail properties outside CBD locations by offering a curated retail offering that has food and beverage at its heart.
“The retail lane was turned into a trendy dining hub in 2015. The laneway concept was inspired by similar dining lanes in Melbourne, New York and Europe. It used bricks reclaimed from the Christchurch earthquake and has shared outdoor seating areas.
“Home to seven leading eateries, including Bird on a Wire, Dantes Pizza & Casa Pasta, El Hunmero and Burger Burger, Fortieth & Hurstmere has boosted the area’s retail experience and encouraged lengthier stay times.”
Beasleigh says the prosperity of shopping strips can be attributed to several factors: the increase in residential developments around retail strips and transportation hubs, population growth, a surge in tourism visits and the push for curated, convenience-focused shopping experiences.
He believes that strip retailers need to work together in order to beat back Amazon.
“Successful strips will be the ones that have coordinated with each other to deliver different shopping environments that reflect their local markets. Locations that have a good diversity of brands, have plenty of food and beverage options and are easily accessible will always have value to shoppers,” he says.
“Suburban retail locations also could benefit from mixed-used developments. Apartment developments that offer ground floor retail space are the way forward as shoppers will always seek out options that offer convenience.
“Like Kiwi Property, many mall operators are looking to grow their assets by adopting this approach - transforming their malls into mixed-use centres, offering not only hospitality and entertainment developments but also office accommodation.”