Originally posted on pmgfunds.co.nz (October 2024)
By Matt McHardy, General Manager Investor Relationships, PMG Funds
New Zealand’s large format retail (LFR) sector remains a resilient and appealing segment within commercial real estate, buoyed by key market trends. With sustained demand for household goods, home improvement supplies, and other large-scale items, LFR is well-positioned for future growth. The country’s population grew by 2.8% in 2023 , 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 that 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 e-commerce-driven world, offering consumers a tangible, hands-on shopping experience that online platforms can’t fully replicate.
Key urban areas like Auckland, Christchurch, and Hamilton have seen the most transactions of LFR in the last five years . 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.
A 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 multi-national 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 110% and 106% 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 . This demonstrates continued confidence in the sector’s potential for regular returns, especially in areas like Auckland and Christchurch, where population growth supports sustained demand for large format retail spaces.
PMG’s Christchurch investment opportunity
PMG is currently offering wholesale investors 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 2023 , 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. Offer closes on or before 29 November 2024.
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To learn more about this and further wholesale investment opportunities and how they could enhance your portfolio contact me.
Disclaimer:
The information in this article is of a general nature only and any views expressed are those of the author. It is not financial advice and does not take any person’s individual circumstances or financial situation into account. There are risks to every investment, and investment returns are never guaranteed. Investors should always consider obtaining their own tax, legal, and financial advice before making any investment decision.
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
The information above about PMG’s Christchurch investment opportunity is not an offer of financial products. This investment opportunity is only available to “wholesale investors” under the Financial Markets Conduct Act 2013. Prospective investors will be required to provide documentation and evidence that they qualify as a wholesale investor. Read the full disclaimer on this investment opportunity at pmgfunds.co.nz/invest
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