Scentre Group announced last week that David Jones are to open a new 8000 square metre store in Newmarket as part of the revitalised Westfield Mega Centre. Whilst the news was not entirely unexpected, they did confirm that the opening is scheduled for late 2019.
However, it was a clever move by Scentre Group at a time when its competitors are making significant moves in the retail market, Precinct in its development at the bottom of Queen Street and Kiwi Property Trust with its major expansion of Sylvia Park. In securing David Jones it signals the proposed pitch of the centre and through the announcement will encourage other retailers to pursue the lease of premises which will have a positive impact on revenue generated due to rentals being in the higher square metre range.
"It’s not the first time David Jones have endeavoured to enter the Auckland market, in the 1990s they attempted to secure premises in Auckland, but the deal fell over at the last minute."
The fact that they recently entered the Wellington market through the leasing and occupation of the ex Kirkcaldie and Stains premises was a signal that they would ultimately move to Auckland. Certainly, they need a flagship store as the Wellington offering is miniscule by comparison to its other stores in Australia.
I don’t necessarily believe that David Jones has the pulling power of other department stores and I suspect that its Wellington offering hasn't captured the imagination of the local consumers, due probably to its higher price points. However, as a known brand it will secure powerful recognition for the new Westfield Newmarket mega-mall.
Of more interest is the announcement that Farmers Trading are leasing 10,000 square metres of space in the new centre as well. This is another smart move by Scentre Group. Whilst David Jones will have a following, a smart new Farmers will continue to attract the middle consumer market in volume, thus customers will have all the opportunities for a range of merchandise all under one roof. It’s similar to centres in Australia where David Jones and Myers occupy the same centre, offering middle market and upmarket merchandise. It also protects Scentre Group from consumer rejection to a David Jones store which may not appeal due to the price points. Much like an insurance policy!
The announcement however, has a wider impact in that Precinct Properties with its Queen Street development will feel a little underdone and will certainly feel some impact from retailers who may be encouraged to now lease premises in Newmarket due to its potential customer pulling power. Not such a big deal for Sylvia Park, the centres expansion was already announced and has secured a Farmers department store, so the only advantage for Newmarket is David Jones.
"So come late next year, the battleground will be sorted and it will be every retailer for itself. Can you imagine however, the vehicle traffic movements?"
Despite the announcement that Westfield Newmarket will have 2770 carparks, the chaos in travelling to either Sylvia Park or Newmarket at peak periods will be enough to discourage the average punter.
Parking in New Zealand shopping centres, particularly Auckland remains a nightmare. Narrow carparks and access issues; continue to provide a difficult outcome for customers. This is not the case overseas where land is plentiful and carparking offered on grade. Despite the attraction of retailers, the major issue for shopping centre developers will be to get their customers into their centres in a relaxed frame of mind. As for concierge parking, that may be a good option for some, but not all customers will want to pay to have their shopping bags collected. The overwhelming challenge therefore remains vehicle movement in an Auckland environment where getting from A to B is a major challenge and time consuming. I wish each developer good luck in that respect, regardless of which retailers are in any development.
The benefit of the Precinct development in Queen Street is that it will not rely on vehicle traffic for its customer base, but will probably lack a major key brand such as David Jones. The benefit to Smith and Caughey who have stores at the top end of Queen street and in Newmarket is that they are not quite at the upmarket level of price points of David Jones and I suspect they will benefit from the arrival of David Jones, where they can compete aggressively in a range of merchandise but at better prices and still offer that traditional level of service which this department store is known for.
Ironical isn't it, that just a few months ago retailers were bemoaning the arrival of Amazon. How the retail world can change overnight with a couple of major bricks and mortar announcements!
Unsurprisingly, 2017 was a stellar year for Millennium & Copthorne Hotels New Zealand. They had “outstanding profit conversion efficiencies from… operating hotels”, which is a fancy way of saying they were creaming it.
Tourism in New Zealand has broken records for the last couple of years, so 2016 and 2017 have been the best years in Millennium & Copthorne’s history. For 2017, revenue hit $106 million (up 11.6%) and profits reached $22.6 million (up 16.6%, and a record).
The result was helped by a full year’s operation at the Grand Millennium Auckland – formerly the Rendezvous, and taken over by Millennium & Copthorne during 2016 – and a reopened MSocial Auckland in late 2017.
Revenue per available room, a common metric for hotels, increased by 8.2% in 2017. Occupancy rates haven’t been released yet, but they’re probably even higher than the 80.7% in 2016, reflecting a buoyant accommodation market with little new capacity on the horizon.
Millennium & Copthorne “expect 2018 to be another positive and exciting year”.
In the Press
Media Highlights Monday 5 February - Monday 12 February 2018
Fletcher Building trading halt extended, company in talks with banks
NZX-listed giant Fletcher Building is talking to its bankers and wants more time in a trading halt, indicating major losses on big New Zealand construction projects, possibly breaching its banking covenants. A media briefing was scheduled to be held at its Penrose headquarters on Great South Rd at 10am today.
Reserve Bank chief economist: if growth lags, we're cutting
A top Reserve Bank official has dismissed criticism from bank economists about his forecasts as "nonsense" saying the bank is ready to cut interest rates if growth lags. On Thursday both Westpac and ASB accused the Reserve Bank of being too optimistic in its forecasts for economic growth.
Postie+ and Freedom Furniture owner seeks to distance itself from parent company's turmoil
Retail group Steinhoff Asia Pacific's latest accounts highlight the challenges facing management, who are attempting to refinance almost A$500 million (NZ$538m) of debt while reportedly seeking funding for a A$1.3 billion buyout. Trading has been going well for the Australasian holding company of furniture chains Freedom, Fantastic Furniture and Snooze, clothing chain Best & Less and department store Harris Scarfe, and Postie+ in New Zealand.
Fonterra expanding in Russia
Dairy giant Fonterra has taken steps to expand its Russian business, months after the new government controversially committed to reopening free trade talks that'd been on ice since the Crimean crisis. The deal was reported in Russian media in December but not announced by Fonterra in New Zealand.