HnM and Zara leading rush of 50 international brands into NZ
H&M and Zara leading rush of 50 international brands into NZ
| 7 October 2016
The recent, much-heralded H&M and Zara store openings are just the first of a rapidly accelerating wave of international retailers seeking to set up shop in New Zealand, according to the latest research published by global real estate firm CBRE.
CBRE’s Pacific Retail Viewpoint research, which tracks over 450 international retailers globally, shows that more than 1.6 millionsqm of retail space (or 1,800 stores) could be sought by international retailers across Australia and New Zealand over the next five years, as:
More than 50 international retailers are certain or likely to enter New Zealand over the next few years with another 80 having a lower degree of certainty of entering.
International retailers are targeting cities in order - Sydney, Melbourne and Auckland first, followed by Brisbane, Wellington and Perth
US and European fashion retailers have dominated expansion into New Zealand, with over 40% of retailers entering from Europe and 36% from the U.S. over the past five years
Fashion brands have contributed close to 70% of total retailers who entered in 2015. Within fashion, luxury and business retailers are the largest (25%) category to enter.
Zoltan Moricz, Senior Director of Research for CBRE New Zealand, says that international retailers used to focus on Australia first before entering New Zealand after a few years, but that has changed.
“The New Zealand retail landscape is undergoing considerable change. International retailers increasingly view the Pacific as one region, with an initial target of the three main gateway cities of Sydney, Melbourne and Auckland. This is shown by the international retailer penetration rate of Auckland being on a par with Brisbane but growing at a more significant pace - on par with Sydney’s growth rate - in the past year, with eleven brands either opening stores or committing to open since the beginning of 2015.
“As an entry point strategy, international retailers tend to open their first flagship store in a CBD centre or strip before expanding to a major regional centre or major airport. This is particularly true for luxury and business, and mid-range fashion brands.”
The acceleration of international brand entry to the region, particularly over the past three years, has been caused by a number of factors:
1. Strong population growth. New Zealand’s population growth has accelerated over the past three years as the country entered an unprecedented migration boom. With about half of the country's migration gain focused on Auckland, the city’s population growth has reached 2.8% per annum – over four times the rate of growth experienced by the major developed world economies (~0.6%pa) over the past decade.
2. High and fast growing per-capita consumption. New Zealand’s consumption per capita grew well ahead of most other developed economies over the last decade. The immigration boom in New Zealand is not only leading to faster population growth, but with the influx of Asian migrants to Auckland, an increasingly attractive demographic in terms of consumption patterns for international brands.
3. Low international brand penetration rate relative to global cities. International brand penetration rate in New Zealand at 16% is low relative to other countries, such as China, Singapore and Hong Kong, all of which have a penetration rate in excess of 45%. There is significant catch-up potential for New Zealand.
4. Chinese tourist arrivals have quadrupled in New Zealand over the last decade, which is supporting retail trade, particularly in the CBD. Last year, there were 400,000 visitors from Mainland China to New Zealand, an increase of 290,000 respectively over the last ten years. Chinese tourists spend 30% of their total purchases on ‘products to take home’, versus only 6% for visitors from the UK, which bodes well for luxury and mid-range retailers in the CBD, as their products are often purchased to take home.
5. Advances in technology, logistics manufacturing have enabled faster setup of new operations. This was previously more challenging given the logistics costs, time and opposite seasonality to Europe and North America. Outsourced manufacturing bases in Asia have made it easier to set up store operations in New Zealand.
Tim Male, CBRE’s Director of Advisory & Transaction Services, Retail, says that he expects brand entry over the next three to five years to remain strong.
“Notably, once offshore retailers have entered the country, many brands, especially those in the mid-range fashion and specialist clothing categories, are quick to expand their footprint. Only a low percentage of retailers within our research are uncertain of expanding further in Australia and New Zealand.
“We expect mid-range fashion and specialist clothing brands to show a rising contribution to brand entry to New Zealand over the next five years. These retailers have a broader target market than luxury brands, who tend to focus only on CBD or super prime regional centre locations.
“This increased choice is great news for shoppers, as is the competition - and another factor: demand from international retailers has driven upgrades to retail assets, as well activating new precincts. Regional shopping centres are seeing international brand entry, and many have undertaken asset enhancement exercises to cater for international brands, as well as supporting their strategies to drive improvements to experiential shopping.”
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.