Population Growth to Create Winners and Losers in Retail

Future Population Growth to Create Winners and Losers in Christchurch Retail.

As Christchurch recovers new population and demographic forecasts begin to paint a picture of a very different urban landscape. Jones Lang LaSalle predicts that this growing population will create demand for an additional 80,000 sqm of retail space over the next 10 years; however underlying data shows that growth will be uneven with both winners and losers being highly dependent on location.

In the last three years the Canterbury region has experienced relatively strong levels of retail sales growth with sales in the region now sitting well above levels achieved before the GFC. Research from Jones Lang LaSalle anticipates this retail sales growth will continue underpinning a strong macro retail story for Christchurch. This growth will be underpinned over the long term by the robust population growth forecast across the city over the next 10 years.

Just over 40,000 sqm of retail development is already in the pipeline tapping into this growing demand, with the greatest opportunities in the Supermarket / Grocery Space, DIY, Home Furnishings and Food and Beverage sectors.

The predicted long term population growth, according to Statistics New Zealand will see more than 30,000 new residents establish households in the city over the next ten years with the majority on the periphery to the north and the south west of the city. The Residential Red Zones to the east of the existing CBD cannot accommodate new housing and as such cut a crescent shaped hole in any future urban population growth.

Chris Harding, Commercial Sales and Investments for Jones Lang LaSalle in Christchurch, says, “There has been a very public effort by authorities and property owners to rebuild the CBD. For the vast majority of the ‘Residential Red Zones’, particularly to the east of the central area, this will not be the case. Most of these areas have been deemed uneconomic to repair, causing disruption over a considerable period of time. As a result residents in such areas as Avondale, Avonside, Burwood and Dallington will see a large decrease in population.”

Further analysis from Jones Lang LaSalle shows that the majority of residents moving out of the Red Zones to the east of the CBD will be forced to pay much higher prices for property within the Christchurch urban area. Its research suggests that these residents will more than likely need to look to the periphery of Christchurch or the surrounding towns where prices for residential property is lower.

Justin Kean, Director of Research and Capital Markets for Jones Lang LaSalle, continues, “The majority of future population growth will occur in the areas of Christchurch where there are already sub-divided and or large tracts of sub-divisible land. Areas such as the Northward Drift – Northwood, Redwood, Marshlands and Belfast and The South Western Spur – Prebbleton, we estimate, will likely see sustained increases in demand for housing over the long term.

Kean adds, “Christchurch’s satellite towns - Lincoln, Rollerston, Kaipoi, Rangiora and Woodend will also see a surge, again due to the availability of land and affordability of housing. As new housing rolls out the biggest winners will be those retail providers that can associate with a growing urban area and whether the stakeholders involved in the process e.g. developers, landowners, tenants and of course the Council can come to terms which will allow the market to deliver the right property solutions, in the right quantities with the right market timing.”

Christchurch’s already existing retail offering; its four regional malls Northlands, The Palms, Eastgate, Westfield Riccarton and the CBD will inevitably feel the impact of this population shift. As residents move out North and South of the city, Northlands and Westfield Riccarton are both well positioned to benefit; The Palms and Eastgate are both losing shoppers from their primary catchments and face challenges ahead in order to increase penetration in their secondary catchments.

Alistair Penny, Director of Property and Asset Management for Jones Lang LaSalle, says, “There is concern around strong development in the suburbs and peripheries but this is against a CBD rebuild that has stalled and still remains dormant which begs the questions… Will there be sufficient demand from the retail sector to fully occupy the CBD? As office and commercial uses return to the CBD there is a level of critical mass required before certain types of retail can succeed. The timing of this development and the ability to get tenants out of the suburbs into the centre will be a key determinant to success”.

ENDS

Paper: Shape_of_retail_christchurch_2.pdf

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