Big entrance

The large format or bulk retail sector has been a standout performer over the past two years, navigating the disrupted marketplace and pivoting to new operating models fairly quickly given resources and strength in numbers.

There’s record low vacancy in the large format sector and consistently high enquiry for space from both existing operators like Chemist Warehouse, Kmart, Bunnings and Mitre 10 in growth nodes around the country – and also new entrants to the market.

While COVID has delayed things, Chris Beasleigh, Bayleys’ national director retail sales and leasing says it’s now green light “GO” for some exciting operators.

“The forthcoming arrival of global heavyweights like IKEA, Costco, JD Sports and Baby Bunting signal tangible confidence in the New Zealand retail market and consumers might be thinking ‘not before time’,” he says.

“With consumers seeking value-for-money in an inflationary market, and looking at one-stop/under one roof shopping options for efficiencies when fuel costs keep rising, it’s an asset class and operating model that looks set to keep delivering on value, convenience and choice.”

Swedish-headquartered flat pack furniture and homewares retailer IKEA, has finally committed to a site within the Sylvia Park mixed use precinct, having purchased 3.2 hectares on the eastern side of the Sylvia Park shopping centre from owners Kiwi Property.

“While firm timelines are not known, IKEA intends on launching a pop-up store six months prior to opening its full-size Auckland flagship operation and is also planning a studio in Wellington, and a second smaller-format store in Christchurch.

“With global annual revenue of EUR 41.9 billion (FY21), recording 775 million visitors during 2021, and typically building stores of around 30,000sqm – IKEA will be a game-changer for the New Zealand retail scene.”

Global membership-based operator Costco’s 14,000sqm New Zealand mega-store is under construction in Auckland’s Westgate and is expected to open later this year selling groceries plus a wide range of other goods such as appliances, automotive products, toys, hardware, sporting gear and apparel.

Costco has 829 warehouses around the world, mainly in the US and has 114.8 million members.

Beasleigh says the word that Costco was coming to Westgate resulted in waves of investor and leasing activity in the surrounding precincts as business operators sought to consolidate a presence on the back of the retail giant’s commitment.

“Other retailers will be looking to leverage off the traffic that Costco attracts and hoping to secure new customers,” he says.

“It’s sparked new interest in Westgate and Costco’s opening is eagerly awaited, with its fuel operation recently opening which will start the customer ball rolling that way.”

Other new entrants to the large format retail scene include JD Sports which has 3,000 stores across the UK, US, Europe and Asia generating GBP 6.2B of sales, and has opened a flagship store at Sylvia Park.

Additionally, baby goods retailer Baby Bunting – which has operated an e-commerce platform here since 2020 – plans 10 stores around New Zealand.

Chris Farhi, Bayleys’ head of insights, data and consulting says global retailers generally establish themselves in Australia first and once that network is operational they review additional opportunities in New Zealand.

“This allows them to understand Australasian consumer tastes, with New Zealand effectively treated as an additional state within their Australian networks,” he explains.

“COVID introduced broad brush delays thanks to general uncertainty and difficulties due to border closures in getting personnel on the ground in New Zealand to conduct due diligence such as visiting sites, but activity is increasing now.”

Farhi says increasingly, e-commerce platforms with shipping via Australia are becoming a useful tool for operators to test demand from Kiwi shoppers and to test entry into the market prior to physical stores.

“An entry to the New Zealand market often sees a need for distribution centre space, too, to support the operation so it also has flow-on to our industrial sector.”

Subscribe to receive the latest commercial news and insights from Bayleys Workplace