New Zealand’s large format retail (LFR) sector remains a resilient and appealing segment within commercial real estate buoyed by key market trends, PMG reveals.
With sustained demand for household goods, home improvement supplies and other large-scale items, large format retail (LFR) is well positioned for future growth. The country’s population grew by 2.8 per cent in 20231, largely due to migration, and this trend is expected to continue, supporting LFR through increased foot traffic and sales potential.
Several factors set large format retail apart in New Zealand’s retail landscape. These properties cater to retailers who need ample space to display and store goods customers often prefer to inspect in person, such as building and DIY materials, home appliances and furniture.
This need for physical retail space has helped large format retail remain resilient in an increasingly ecommerce-driven world, offering consumers a tangible, hands-on shopping experience that online platforms can’t fully replicate.
Key urban areas, such as Auckland, Christchurch, and Hamilton, have seen the most transactions of LFR in the last five years2.
These regions are benefiting from population growth and stable economic fundamentals which have supported steady demand. While consumer confidence remains cautious due to inflation and interest rate pressures, spending on essential household goods and DIY products has held up, contributing to the long-term resilience of LFR properties.
Stable investment opportunity
LFR can present a stable, long-term opportunity for investors. While growth has slowed over the past few years, LFR properties remain well positioned for gradual recovery and future expansion. Between 2018 and 2023, LFR retailers in New Zealand recorded strong sales growth, reflecting ongoing demand for these properties.
Tenants in this sector are typically well established national and multinational brands with long-term leases, which provide reliable rental income and help minimise vacancy risk.
For example, Mitre 10 and Kmart, key players in the home improvement and housewares sectors, recorded sales growth of 1103 and 106%4 respectively during this period, underscoring the enduring strength of their brands and the importance of large format retail.
Private investors, particularly domestic buyers, have driven the majority of large format retail transactions in New Zealand over the past five years, accounting for roughly 70% of total investment activity 5.
This demonstrates continued confidence in the sector’s potential for regular returns, especially in such areas as Auckland and Christchurch, where population growth supports sustained demand for large format retail spaces.
PMG’s Christchurch investment
PMG is currently offering wholesale investors6 a large format retail investment opportunity in Prestons, Christchurch. The new development will be anchored by Mitre 10, one of New Zealand’s leading home improvement retailers, on a 20 year lease.
As Christchurch continues to grow, with a population increase of 1.5% in 20237, this property is well positioned to serve as a key retail hub. This represents a prime opportunity for wholesale investors to gain exposure to a sector with the potential for stable, long-term potential.
To learn more about this wholesale investment opportunity and how it could enhance your portfolio, visit pmgfunds.co.nz/invest or contact PMG for further details.
1. Stats NZ, 16 February 2024
2. Intelligent Investment, Large Format Retail New Zealand, CBRE, Feb-24
3. Intelligent Investment, Large Format Retail New Zealand, CBRE, Feb-24
4. Intelligent Investment, Large Format Retail New Zealand, CBRE, Feb-24
5. Intelligent Investment, Large Format Retail New Zealand, CBRE, Feb-24
6. As defined under the Financial Markets Conduct Act 2013
7. Infometrics, NZ 2023
