DFS Galleria has shut its doors, and Smith & Caughey has hosted its last Christmas window. You don’t have to look far to find examples of retailers that have closed their doors in recent times.
Now data from Colliers confirms what many shoppers have noticed – there are a lot more empty shops in our main centres’ streets.
There has been a jump in the percentage of empty retail spaces, as a proportion of overall space, in both Auckland and Wellington.
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Auckland’s overall strip vacancy rate has lifted from 6.3% in June 2019 to 10.5% now. Its CBD strip vacancy rate has lifted from 0.9% in June of 2019 to 11%. It hit a high of 14.4% in 2021.
Auckland’s suburban strip vacancy rate has lifted from 7.4% to 10.5% over the same period.
In Wellington, the overall CBD vacancy rate has lifted from 4.2% to 9.3%. Lambton Quay’s rate has increased from 3.5% to 8.5% and Willis Street’s has lifted from 3.5% to 7.9%.
Colliers’ national director of research and economics, Hamish Fitchett, said things had been “pretty rough” since Covid.
“We had the whole cost-of-living crisis and then the high interest rates to bring inflation back down. In Wellington we’re still seeing a tick up [in vacancy] which is the result of ongoing job losses there, a lot of uncertainty in the capital.”
He said big closures such as Smith & Caughey and DFS increased the vacancy rate because they took up a lot of floor space.
Fitchett said some retailers were also affected by Inland Revenue taking a harder line on overdue taxes.
“The economic recovery has been a little bit slower than we expected it to be so they were willing to put people on payment plans but after another six months of these tough economic conditions they are starting to do collections which then ends up sometimes forcing more vacancies.”
He said lower interest rates should help give consumers more money to spend.
“Electronic card transaction data has been ticking upwards month-on-month for core retail spending so that is another good sign.”
He said Auckland and Wellington were probably the toughest areas in the country for retail.
“That’s partly because this is where house prices have historically been the highest so people have just had larger mortgages, which meant higher interest rates.”
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He said reports from the South Island were that there was more momentum behind markets such as Canterbury and Otago.
Retail NZ chief executive Carolyn Young said it was possible that some of the reduction since 2021 was due to “pop up” shops that had taken on empty spaces for a short period of time.
She said the mix of retail was also changing.
“Where our office is, we’re in Victoria St in Wellington and there’s a dairy across the road from us and a vape shop either side of that, something like that – and then another convenience store or small grocery has opened more or less next door to us … everyone fights for the same footprint and foot traffic.”
She said there was a lot less foot traffic around and less confidence.
“Businesses are cautious about expansion or relocating stores.”
Young said retailers were still positive about things improving again.
“Retailers are generally pretty optimistic. Their sales data doesn’t back up their optimism, but they’re pretty optimistic about the future.
“Part of that is because when you sit here right now, they’ve bought their summer stock, the freight’s probably arrived and or arriving, and they’ve got to sell the stock they’ve got to put out this beautiful new stock.
“And, you know, Labour weekend, Black Friday, Christmas, Boxing Day are all to come. And we know that they’re normally positive events in a retail calendar.”
But she said when a lease came up for renewal, it often prompted people to think about what they would do next.
“If the landlord’s pretty reasonable and understands the challenges that that particular retailer has and they aren’t trying to hike up the lease, a retailer may well sign on and continue.
“But sometimes we’ve heard where the landlord’s not very flexible, that the retailer might just decide to close up store.”
She said online sales were back to pre-Covid levels but people were using websites to window shop now.
“Consumers are more direct about what they’re doing when they are in town.
“Back in the day, I would have gone into town maybe for an afternoon if I had time and would have done my window shopping in-store.
“I would have gone in and looked at a whole lot of stuff and gone away and thought about it for a week or two and then gone back and bought something.
“People do that online now. So foot traffic may never return back to the level that it was, but we’re struggling to work out what is the optimum level of foot traffic to ensure that you’ve got growth in your business. And we’re definitely not there.”
Chris Wilkinson, from First Retail Group, said it was a pattern that was seen across the country. “There’s growth in retail vacancies as retailers jostle for better spaces, there’s quite a lot of churn. As better spaces are coming up retailers are taking the opportunity.”
He said some landlords were also being more strategic and looking for the right tenant for a particular building.
“The city centres are finding it challenging because they don’t have the guaranteed audiences like they used to. Cities are built on having weekday audiences.”
Wilkinson said some of the consumer behaviour of the downturn had become entrenched because even as interest rates dropped, people were opting top pay off debt rather than spend.
Ben Kepes, whose Cactus Outdoor store in Ponsonby is near some empty shops, said retail was in the doldrums.
But he said businesses that had a differentiated product and sold on quality were holding their own.
“We’re a destination brand, and so people that want what we have, the only place they’re going to get it from is us, and so they come.
“If you’re relying on foot traffic and you’re essentially an undifferentiated product, you know, trying to sell the same thing as your next door neighbour, it’s really, really hard. It’s across the country from my observation from the far north to the far south, retail is really, really hard right now.
“We’re seeing the long tail of interest rates and just a lack of confidence, but I mean, I think much more importantly for retailers, you know, because you can’t control the external situation, and what you can control is what you do, and so I think it’s a really good chance for brands and retailers to think about what they do, think about their core proposition and start selling on value, not on price.”
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