OCTOBER 2015 KAPITI COAST RETAIL ANALYSIS KAPITI COAST DISTRICT COUNCIL

Transcription

1 OCTOBER 2015 KAPITI COAST RETAIL ANALYSIS KAPITI COAST DISTRICT COUNCIL

2 Code Date Information / Comments Project Leader March 2015 Report Tim Heath / Phil Osborne DISCLAIMER Property Economics have taken every care to ensure the correctness of all the information contained in this report. All information has been obtained by what are considered to be reliable sources, and Property Economics has no reason to doubt its accuracy. It is however the responsibility of all parties acting on information contained in this report to make their own enquiries to verify correctness. This document has been prepared for the use of Kapiti Coast District Council only. Copyright 2015 by Property Economics Limited. 2

3 TABLE OF CONTENTS 1. INTRODUCTION CORE OBJECTIVES INFORMATION SOURCES DEMOGRAPHIC PROFILING POPULATION AND HOUSEHOLD PROJECTIONS CURRENT KAPITI BUSINESS ENVIRONMENT KAPITI COAST BUSINESS NODES KAPITI COAST RETAIL MARKET KAPITI RETAIL SUPPLY BNZ MARKETVIEW RETAIL TRANSACTION DATA ANALYSIS RETAIL LEAKAGE ('DESTINATION' OF KAPITI COAST RETAIL EXPENDITURE) RETAIL EXPENDITURE INFLOW INTO KAPITI COAST DISTRICT KAPITI COAST DISTRICT NET RETAIL EXPENDITURE POSITION KAPITI COAST DISTRICT RETAIL DEMAND VS SUPPLY FUTURE CENTRE ROLES RETAIL CENTRE HIERARCHY AND ROLE APPENDIX : 1 DEMOGRAPHIC PROFILES APPENDIX : 2 RETAIL EXPENDITURE MODEL APPENDIX : 3 RETAIL CLASSIFICATIONS APPENDIX : 4 RETAIL CENTRES BREAKDOWN

4 LIST OF TABLES TABLE 1: KAPITI COAST DISTRICT POPULATION AND HOUSEHOLD PROJECTIONS... 9 TABLE 2: KAPITI COAST ANNUALISED RETAIL EXPENDITURE FORECASTS ($M) TABLE 3: KAPITI COAST RETAIL EXPENDITURE AND FLOORSPACE FORECASTS TABLE 4: RETAIL CENTRE CORE CATCHMENT FORECASTS ($M) TABLE 5: KAPITI COAST CENTRES RETAIL SUPPLY JUNE TABLE 6: KAPITI COAST STORE SIZE BREAKDOWN TABLE 7: KAPITI COAST RETAIL SUPPLY BY CENTRE GFA (SQM) LIST OF FIGURES FIGURE 1: KAPITI COAST BUSINESS NODES FIGURE 2: INDICATIVE RETAIL CENTRE CORE CATCHMENTS FIGURE 3: KAPITI COAST RETAIL GFA DISTRIBUTION JUNE FIGURE 4: LOCAL COMMERCIAL CENTRE HIERARCHY FIGURE 5: SUMMARY COMMERCIAL NODES FACTSHEETS

5 1. INTRODUCTION Property Economics Limited ( PEL ) has been engaged by Kapiti Coast District Council ( KCDC ) to undertake analysis of the current and future retail market in Kapiti. The base document for this assessment was the Property Economics and Planit Associates 2012 Employment Areas Study. This assessment focuses specifically on the retail components. Also utilised for this assessment is the MarketView market intelligence acquired for KCDC as part of the PC72A Environment Court hearing process. The successful outcome of this hearing, in respect of KCDC s position, and its implications has been considered in the development of this report. Combined they provide a more complete picture for policy development within KCDC s Proposed District Plan ( PDP ). This updated assessment provides a detailed understanding of the current Kapiti Coast retail market and centres (drivers, trends, secular breakdown and future requirements). This report is designed to help KCDC form a robust position on relevant submissions as part of the PDP process, and to assist in any discussions with submitters aimed at minimising the scope of issues where differences may arise. 5

6 1.1. CORE OBJECTIVES The main objectives of this report include: Identify and analyse the major retail nodes within Kapiti Coast. Analyse temporal trends and changes over time of the retail environment within the district. Identify and analyse all centre and non-centre retail locations, comparing the differences in land area, type and zonings with employment characteristics. Discuss the role of each centre (in terms of retail) in the District s network. Analyse MarketView retail transaction data to enable an accurate picture of annualised retail spending flows in Kapiti. Determine any sustainable demand / retail supply differentials, and assess any implications for current and future retail provision requirements in the PDP INFORMATION SOURCES Information has been obtained from a variety of sources and publications available to Property Economics, including: NZ Census of Population and Dwellings 2006 & Statistics NZ Household Economic Survey - Statistics NZ Population Growth Projections (Medium Series) 2015 Statistics NZ Retail Trade Survey - Statistics NZ Business Frame Employment Data Statistics NZ Kapiti Coast District Household and Population Projections 2014 KCDC Kapiti Coast Retail Audit June 2011 Property Economics MarketView Retail Transaction Data BNZ 6

7 2. DEMOGRAPHIC PROFILING This section identifies some of the key economic and social characteristics and demographia of the Kapiti Coast District compared to the wider regional and NZ markets for comparison purposes and context. A full breakdown of the demographic profiles is provided in Appendix 1. Some key points from the Demographic Profiling include: The Kapiti Coast District has current population base of around 51,500 residents residing in approximately 22,700 households. This comprises approximately 10% of total population within the wider Wellington Region. The age profile of Kapiti is very age heavy relative to the regional and NZ markets. In Kapiti the percentage of people aged years (7%) is around half of the Wellington and NZ average (13%). This is the result of this age cohort leaving the district for tertiary education and job opportunities in larger urban areas such as Wellington and Auckland. There is also a very high proportion of people aged 60+ years (32%) compared to Wellington and NZ average (18% and 19% respectively). This typically affects household income levels and therefore retail expenditure levels, albeit this age group typically has less debt and higher equity but generally lower spending propensity. Kapiti Coast s older age bias has flow on effects into other demographia, such as the proportion of population in the labour force is significantly lower in Kapiti due a higher proportion of retirees. Within the Kapiti District around 22% of households earn over $100,000 per annum, compared to a significantly higher 35% of households across the wider Wellington Region and 28% average across New Zealand. This is due to the lower number of wage / salary workers in the district, where only 57% of households in Kapiti derive their income from wage / salaried work, compared to 73% and 69% in the wider Wellington region and NZ average. The Kapiti Coast District also has a lower proportion of Two Parent Families and a higher proportion of Couples and Single households. This is again a reflection of the higher proportion of the population aged 60+ years, and a determinant of lower household incomes (i.e. from fewer households with multiple income earners). Compared to the Wellington region and NZ average, the ethnicity composition of Kapiti Coast has a higher proportion of European populous and a lower proportion of Pacific Peoples and Asian population. Overall, the district profile can be summarised as predominately an older, European market with a lower average annual household income and lower proportion of 7

8 residents in paid employment. These demographia effect the level of discretionary retail spending in the district, which would on average be lower on a per household unit basis compared to the Wellington and New Zealand average. 8

9 3. POPULATION AND HOUSEHOLD PROJECTIONS Table 1 displays the population and household growth projections for the Kapiti Coast District. These projections are derived from the Property Economics Growth Model which has its key inputs being the 2013 census population and household counts, Statistics NZ medium series projections (2015) and recent building consent data ( ). TABLE 1: KAPITI COAST DISTRICT POPULATION AND HOUSEHOLD PROJECTIONS HOUSEHOLDS AND POPULATION Population 51,412 52,500 54,300 56,100 57,700 Households 22,717 23,452 24,602 25,750 26,660 Household Size Population Growth (p.a.) 0.70% 0.68% 0.65% 0.56% Household Growth (p.a.) 1.07% 0.96% 0.92% 0.70% Source: Property Economics Growth Model For the purpose of this report, year 2015 is classified as current (colour coded in blue), year 2018 is classified as short term (colour coded in yellow), year 2023 is classified as medium term (colour coded in green) and years 2028 to 2033 are classified as long term (colour coded in pink). In 2015, there are estimated to be around 51,400 people residing in the district, with this figure expected to grow to around 57,700 by Nominally, population growth in the district is projected to be nearly 6,300 people net over the period to 2033, equivalent to a 12% population base increase. Households within the catchments are projected to increase by around 3,900 net over the forecast period to around 26,700 by This is equivalent to average net growth over the period of around 220 dwellings per year. Table 1 also indicates that the number of households is increasing at a faster rate than the population due to a projected fall in the person per dwelling ratio over the forecast period. This is not isolated to the study area, but a trend projected to occur across the whole country due to an aging population, smaller families and a higher proportion of split or single parent households. 9

10 4. CURRENT KAPITI BUSINESS ENVIRONMENT 4.1. KAPITI COAST BUSINESS NODES For the purpose of this report Property Economics have identified key business nodes within Kapiti. These nodes have been identified based on current sector employment levels within Kapiti on a meshblock level, with a material cluster of activity required for it to be considered a node, i.e. typically over 15 tenancies. These nodes form the basis of the retail analysis in this report. Figure 1 below illustrates the current nodes within Kapiti Coast District. Due to the close proximity of the nodes, alternating colours have been used to better identify the different nodes. FIGURE 1: KAPITI COAST BUSINESS NODES Source: Property Economics, Google Earth It is important to note that while the area of Te Horo has between employees, there is no definitive centre or concentrated cluster of activity within the area, rather a small 10

11 number of convenience, commercial, and industrial activities spread over a wide area within the meshblock. It is on this basis we have not defined Te Horo, as well as other small activity clusters, as centres or business nodes (e.g. Waikanae Beach, Raumati South). The red nodes in Figure 1 represent existing retail nodes, the yellow industrial areas, while the blue are represents the Paraparaumu Airport node KAPITI COAST RETAIL MARKET This section of the report estimates the current level of retail expenditure that is generated within the Kapiti Coast District on an annualised basis by retail sector. Retail expenditure forecasts have been based on the aforementioned population and household growth projections as outlined in Section 3 and has been prepared using the Property Economics Retail Expenditure Model. A more detailed breakdown of the model and its inputs can be seen in Appendix 2, and a full list of the ANZSIC 1 retail sectors and the store types contained within is attached in Appendix 3. Growth in real retail spend has also been incorporated at a rate of 1% per annum over the forecast period. The 1% rate is an estimate based on the level of debt retail spending, interest rates and changes in disposable income levels, and is the average inflation adjusted increase in spend per household over the assessed period. Note the figures below are in 2015 dollars and exclude the retail categories of: Accommodation (hotels, motels, backpackers, etc.) Vehicle and marine sales & services (car yards, boat shops, caravan sales, Repco, Super Cheap Autos, tyre stores, panel beating, mechanical repairs etc.) Hardware, home improvement, building and garden supplies retailing (e.g. Mitre 10, Hammer Hardware, Bunnings, PlaceMakers, ITM, Kings Plant Barn, Palmers Garden Centres, etc.) The above activities are not considered to be core retail expenditure, nor fundamental retail centre activities in terms of visibility, location, viability or functionality. The latter two bullet points contain activity types that generally have great difficulty establishing new stores in centres for land economic and site constraint reasons, i.e. the commercial reality is that for most of these activities it would be unviable to establish new stores in centres given their modern store footprint requirements and untenable to remain located within them for an 1 Australia New Zealand Standard Industrial Classification 11

12 extended period of time (beyond an initial lease term) due to property economic considerations such as rent, operating expenses, land value, site sizes, etc. Also excluded are trade based activities such as kitchen showrooms, plumbing stores, electrical stores, paint stores, etc. for similar reasons. This is not to imply that these activity types are not situated in centres, as in many instances some of these land uses remain operating in centres as an historical overhang. However, moving forward it is increasingly difficult from a retail economic perspective to see these store types establishing stores in centres (new or residential), albeit they likely have equal planning opportunity to do so. It is important to note that the retail expenditure generated in the Kapiti Coast does not necessarily equate to the cumulative sales of the retail stores within the district. Residents can freely travel in and out of the district, and they will typically choose the centres with their preferred range of stores, products, brands, proximity, accessibility and price points (among a variety of other reasons). A good quality centre will attract a noteworthy level of customers from beyond its core catchment, whereas a low quality centre will have elevated levels of retail expenditure leakage out of its catchment. Therefore, the retail expenditure generated in a catchment represents the sales level, centres or retail stores within the catchment could potentially achieve which at this point in the methodology represents a useful theoretical benchmark that is grounded with actual MarketView retail transaction data later in the analysis. Sustainable floorspace refers to the level of floorspace proportionate to an area s retainable retail expenditure that is likely to result in an appropriate quality and offer in the retail environment. This does not necessarily represent the break even point, but a level of sales productivity ($/sqm) that allows retail stores to trade profitably and provides a good quality retail environment. There is also a need to translate net retail trading floorspace into Gross Floor Area ( GFA ) as net retail trading floorspace excludes floor area in a retail store used for storage, warehousing, staff facilities, office, toilets, etc. These activities typically occupy around 25-30% of a retail store s GFA. It is important to separate out this back office floorspace as it does not generate any retail spend and represents an area the general public is typically excluded. Table 2 illustrates the forecast annualised retail expenditure figures generated in the Kapiti District by ANZSIC categories out to Table 3 shows the consolidated retail figures from Table 2 and sustainable floorspace figures (GFA and net) for the same period. 12

13 TABLE 2: KAPITI COAST ANNUALISED RETAIL EXPENDITURE FORECASTS ($M) Food retailing $239 $251 $271 $294 $309 Clothing, footwear and personal accessories retailing $53 $56 $62 $68 $72 RETAIL EXPENDITURE ($M) Furniture, floor coverings, houseware and textile goods retailing $24 $25 $27 $29 $31 Electrical and electronic goods retailing $25 $26 $28 $30 $32 Pharmaceutical and personal care goods retailing $18 $19 $20 $22 $24 Department stores $58 $61 $66 $72 $76 Recreational goods retailing $28 $29 $32 $34 $36 Other goods retailing $30 $32 $35 $39 $41 Food and beverage services $106 $112 $122 $134 $141 Total $581 $611 $664 $724 $761 Source: Property Economics TABLE 3: KAPITI COAST RETAIL EXPENDITURE AND FLOORSPACE FORECASTS Retail Expenditure ($m) $581 $611 $664 $724 $761 Sustainable Net Floorspace (sqm) 80,519 84,697 92, , ,460 Sustainable GFA (sqm) 115, , , , ,657 Source: Property Economics 13

14 The Kapiti Coast District currently generates just over an estimated $580m in total retail expenditure annually. This is estimated to increase to around $760m annually by 2033 based on aforementioned rates of growth. Table 3 converts the retail expenditure forecasts into net retail floorspace demand, by applying retail sales productivity rates (i.e. typical retail sector sales/sqm) on a sector by sector basis. Tables 2 & 3 indicate that as the retail expenditure grows, the sustainable net retail floorspace is forecast to increase from around 80,500sqm to 105,500sqm by There is a need to translate net retail trading floorspace into GFA as net retail trading floorspace as outlined earlier, only includes the area which displays the goods and services sold and represents the area the general public has access, whereas the GFA typically represents the total area leased by the retailer. In terms of GFA, and adopting a 30% ratio, the figures in Table 2 equate to a total of around 115,000sqm of sustainable GFA currently, estimated to increase to around 150,000sqm by 2033, representing growth in sustainable retail GFA of around 35,000sqm (rounded) over the projected period. Figure 2 illustrates the indicative core trade catchment for each of the identified retail / commercial nodes (blue dotted lines). These have been based on the role / function of the centres in the network, their respective locations, centre offer, roading network, competing centres and natural geographic constraints. This has been done in order to estimate the retail and commercial and sustainable floorspace requirements of the centres. These have been identified based on the concentration and distribution of retail and commercial activity located in the Kapiti Coast District. Note Raumati refers to Raumati Beach. Due to the unique nature of the Otaki Outlet Centre, i.e. its outlet offer and multi-district customer draw, a catchment has not been identified for the centre. Given the district-wide draw of the Paraparaumu Town Centre, and the physical geography of Kapiti, it has been assumed the retail catchment for this centre is represented by the entire Kapiti Coast District which represented in Table 2. These catchments form the basis of the subsequent retail and commercial analysis, and these are not considered likely to materially change with the development of the expressway due to their convenience focus. 14

15 FIGURE 2: INDICATIVE RETAIL CENTRE CORE CATCHMENTS Source: Property Economics Figure 2 illustrates the core market catchments for the identified centres based on their role and function over the foreseeable future. The catchment for Paraparaumu Town Centre has not been illustrated given that its catchment is at a district level (i.e. encompassing all of the Kapiti Coast District), and beyond the geographic extent of Figure 2. The centres of Raumati, Otaki Town Centre, Paraparaumu Beach and Paekakariki generally perform a convenience retailing function only, and in contrast, the Waikanae Town Centre performs a convenience plus supermarket retailing role and function within the wider market. For the purpose of this analysis, Table 4 reflects these differences in role and function with the Retail Expenditure and Sustainable GFA figures for the centres of Raumati, Otaki Town 15

16 Centre, Paraparaumu Beach and Paekakariki comprising of convenience retailing only, and Waikanae Town Centre comprising of both supermarket and convenience retailing. Note these catchments are not intended to represent the entire catchment of the centres, but estimate the geospatial extent of their core economic markets and where the majority of their retail sales would likely be derived, and the primary market that each centre is intended to service. TABLE 4: RETAIL CENTRE CORE CATCHMENT FORECASTS ($M) RETAIL EXPENDITURE ($M) Retail Expenditure ($m) Waikanae Town Centre $70 $78 $88 $98 $102 Raumati $13 $15 $17 $19 $20 Otaki Town Centre $11 $12 $14 $15 $15 Paraparaumu Beach $9 $9 $10 $11 $11 Paekakariki $3 $3 $4 $4 $4 SUSTAINABLE GFA (SQM) Sustainable GFA (sqm) Waikanae Town Centre 9,065 10,059 11,346 12,702 13,275 Raumati 2,109 2,352 2,676 3,026 3,175 Otaki Town Centre 1,820 1,958 2,146 2,350 2,437 Paraparaumu Beach 1,413 1,486 1,582 1,687 1,731 Paekakariki Source: Property Economics Convenience retailing can be generally defined as stores used for quick stop or frequently required shopping, used primarily due to their ease of accessibility and close proximity to the customer. These stores are not exclusive to any one retail category or restricted to only outof-centre retail stores, examples of such stores include dairies, liquor stores, cafes and restaurants. 16

17 Convenience retail spend is estimated to represent around 19% of all retail expenditure, excluding supermarket expenditure. Including supermarket spend increases this percentage to 50%. These ratios have been adopted for the purpose of this analysis. Currently the core Waikanae Town Centre catchment generates around $70m per annum, this is expected to grow to over $100m pa by The current level of convenience (incl. supermarket) expenditure within the Waikanae Town Centre catchment is comprised of around $45m attributable to Supermarket Retailing expenditure and $25m attributable to convenience retailing expenditure, with these sectors growing to $67m and $36m by 2033 respectively. Translating this to GFA, the Waikanae Town Centre catchment can currently sustain around 2,700sqm in convenience retailing and 6,300sqm in supermarket retailing, forecast to grow to 5,700sqm and 7,600sqm respectively by Within the Raumati catchment, convenience retail expenditure generated is currently around $13m pa, forecast to grow to $20m by Sustainable GFA within this catchment is currently around 2,100sqm, and estimated to grow to 3,200sqm by Convenience retail expenditure within the Otaki Town Centre is currently around $11m pa with a sustainable GFA of 1,800sqm. This is forecast to grow to $15m pa and 2,400sqm GFA by The Paraparaumu Beach catchment is currently generating convenience retail expenditure of $9m pa growing to $11m by In terms of sustainable net floorspace, this catchment can sustain around 1,400sqm GFA. By 2033 the catchment is forecast to be able to sustain around 1,700sqm. Paekakariki represents the smallest identified centre and market with a generated retail expenditure level of just over $3m pa currently growing to nearly $4m pa by Sustainable GFA for the catchment is currently around 500sqm (or roughly 4-7 small stores). This GFA provision remains largely unchanged over the assessed period. 17

18 4.3. KAPITI RETAIL SUPPLY In June 2011 Property Economics undertook a retail audit of the Kapiti Coast in-centre retail supply. This involved measuring the net retail floorspace of all retail centre stores within the Kapiti Coast by sector. These figures were then translated to GFA using an average 70% net to GFA ratio. Floorspace information from the NZSCD 2 has also been used as part of this audit. While the audit was completed a few years ago now, it is still considered relevant to provide a useful baseline on the general retail provision and composition within Kapiti given the limited development of new retail GFA in Kapiti subsequently. The results of the audit are displayed in Table 5, and shown by GFA, number of retail stores, and the respective percentages by ANZSIC retail sector. A full breakdown of each centre s retail composition is provided in Appendix 4. TABLE 5: KAPITI COAST CENTRES RETAIL SUPPLY JUNE 2011 Store # GFA (sqm) Store % GFA % Supermarket Retailing 6 15,191 2% 16% Other Food retailing 29 5,021 8% 5% KAPITI COAST RETAIL PROVISION 2011 Clothing, footwear and personal accessories retailing 80 14,902 21% 16% Furniture, floor coverings, houseware and textile goods retailing 27 13,521 7% 14% Electrical and electronic goods retailing 9 3,026 2% 3% Pharmaceutical and personal care goods retailing 8 1,364 2% 1% Department stores 3 9,972 1% 10% Recreational goods retailing 23 5,247 6% 5% Other goods retailing 42 5,168 11% 5% Food and beverage services ,064 30% 18% Vacant 37 5,513 10% 6% Under Construction % 0% Total , % 100% Source: Property Economics Table 5 excludes Hardware Building Supply and Home Improvement sector for reasons outlined earlier. As such, while this sector remains under the Retail Sector classifications according to the 2006 ANZSIC system, it is not considered core retail activity within centres 2 New Zealand Shopping Centre Directory 18

19 for the purposes of this type of analysis or the development of appropriate PDP retail provisions. This is supported by more recent RMA case law and a position now recognised by most Council s around the country in their replacement District Plan processes. Within the Kapiti Coast as at June 2011, there were around 380 retail stores delivering to the market an estimated 96,100sqm of retail GFA. Vacancy levels in Kapiti Coast totalled around 37 stores, encompassing an estimated 5,500sqm in GFA. This represented around 10% of the total retail market by store number and 6% by GFA. It is worth noting the survey is a snapshot in time and retail stores are constantly opening, closing and relocating due to a variety of individual store circumstances. In this regard the retail market is fluid and undergoing constant change. Given this, the vacancy percentage is not of concern at its current level, but any increase in vacancy trends would start being of concern and start to compromise further the quality of the district s retail offer, centre environments and subsequently the shopper experience. The retail sector representing the largest proportion of the market in terms of store count (by some margin) is Food and Beverage Services with 115 stores or 30% of the total district retail provision by store number. Clothing, Jewellery and Personal Accessories represents the second largest proportion of the market in terms of store count with 80 stores representing 21% of the total market. Combined, these two sectors alone nominally comprise over half of the Kapiti Coast retail offer. This is not unusual given the key focus of these two sectors in the shopping destinations within Kapiti and the broad commercial appeal these sectors have in the community. Figure 3 below illustrates the current Kapiti Coast retail GFA composition distributed by retail sector. This is a graphic representation of the GFA information in Table 5. 19

20 FIGURE 3: KAPITI COAST RETAIL GFA DISTRIBUTION JUNE % 2% Supermarket Retailing 90% 8% 16% Other Food retailing 80% 21% 5% Clothing, footwear and personal accessories retailing 70% 16% Furniture, floor coverings, houseware and textile goods retailing 60% 7% 2% Electrical and electronic goods retailing 6% 14% Pharmaceutical and personal care goods retailing 50% 11% 3% Department stores 40% 10% Recreational goods retailing 30% 30% 5% 5% Other goods retailing 20% Food and beverage services 18% 10% Vacant 0% 10% 6% Store % GFA % Under Construction Source: Property Economics In terms of number of stores and largest proportion of GFA in Kapiti Coast is represented by Food and Beverage Services, representing nearly a third of all retailing within the district and 18% of overall GFA. This is not surprising given that Food and Beverage Services is essentially fundamental retail centre activity. Interestingly, while this Supermarket Retailing represents only 2% of all retail stores in Kapiti Coast, they comprise 16% of the total retail GFA. This is due to their preference to offer their goods and services to the market via a store with a larger footprint resulting in a larger average store size, which when combined, is 2,550sqm GFA per tenancy on average. Table 6 breaks the retail audit down further by store numbers in three store size categories by sector, namely 0-499sqm, sqm and 1,000sqm plus. This provides a more detailed synopsis of the district s existing retail structure. 20

21 TABLE 6: KAPITI COAST STORE SIZE BREAKDOWN Store Count GFA (sqm) Total Total KAPITI COAST RETAIL STORE SIZE COMPOSITIOIN 2011 Supermarket Retailing ,191 15,191 Other Food retailing , ,021 Clothing, footwear and personal accessories retailing ,321 2,469 1,112 14,902 Furniture, floor coverings, houseware and textile goods retailing ,421 2,857 6,243 13,521 Electrical and electronic goods retailing , ,220 3,026 Pharmaceutical and personal care goods retailing , ,364 Department stores ,972 9,972 Recreational goods retailing ,028 1, ,247 Other goods retailing , ,168 Food and beverage services ,778 2,229 2,057 17,064 Vacant , ,513 Under Construction Total ,494 9,813 35,795 96,102 Total % 92% 4% 4% 100% 53% 10% 37% 100% Source: Property Economics This sheds a different light on the Kapiti Coast retail composition. At present, a significant 92% of retail stores are small (below 500sqm) specialty / finer grain retailers, however these smaller boutique stores only represent 53% of Kapiti Coast retail GFA. Average store GFA in the 0-499sqm category is around 145sqm. This is a reflection of the role and function of many centres in the district which is to primarily provide the day-to-day convenience needs of the market, apart from the Paraparaumu Town Centre which also has a higher order role, and the relatively small size of the respective centre s catchments. Interestingly, retail stores 500sqm GFA plus represents only 8% of store numbers but nearly half of Kapiti Coast s total retail GFA. These stores, because being over 500sqm, are typically classified as Large Format Retail ( LFR ) stores and have an average GFA of around 1,500sqm. The bulk of Kapiti Coast s LFR offer is situated in the Paraparaumu Town Centre, and forms an important part of this retail core of the district. With over 90% of stores under 500sqm, the analysis shows it is the finer grain specialty stores that are crucial to the Kapiti Coast retail centres, and undermining this store type is likely to adversely affect the role, function, performance, vitality, vibrancy and amenity of the centres in Kapiti. 21

22 Table 7 aggregates the figures shown in Table 6 and categorised them by their respective retail centre. A full breakdown of each centre s retail composition is provided in Appendix 4. TABLE 7: KAPITI COAST RETAIL SUPPLY BY CENTRE GFA (SQM) GFA (sqm) KC CENTRE RETAIL PROVISION 2011 Paraparaumu Town centre Total 56,498 Waikanae 10,364 Otaki Outlet Centre 10,329 Otaki TC 7,400 Paraparaumu Beach 7,286 Raumati Beach 3,693 Paekakariki 533 Kapiti Coast Total 96,102 Source: Property Economics As indicated by Table 7, the current retail GFA within the district totals around 96,100sqm. The most dominant and highest order centre in the district is the Paraparaumu Town Centre (including Coastlands) with an estimated total of around 56,500sqm GFA, accounting for approximately 60% of total retail floorspace in the Kapiti Coast. With approximately three out of every five square metres of Kapiti s current retail provision in the Paraparaumu Town Centre, the other centres in the district primarily play a supporting role and service the more localised and convenience needs of their surrounding communities, compared to the Paraparaumu Town Centre which has a district wide function and attracts shoppers from across Kapiti. The remaining 40% of Kapiti s retail activity is dispersed across the balance of centres. Some of these are larger than what their local catchment can sustain (i.e. Paraparaumu Beach), but this is due to the influx from visitors throughout the year. This is reflected in the very high proportion of Food and Beverage Service outlets in the centre 41%. This will be discussed further later in this section. 22

23 Interestingly, the Otaki Outlet Centre is larger than the Otaki Town Centre and has surpassed it in terms of depth and breadth of its retail offer. While the centres have different functions in the market, the emergence of the Otaki Outlet Centre has weakened the role of the Otaki Town Centre locally and had effects on the quality of offer, local shopping patterns and retailer location preferences, with Otaki Outlet Centre performing significantly higher than the Otaki Town Centre and drawing shoppers from a much wider geo-spatial catchment. In this regard the Otaki Outlet Centre is a unique / niche centre in Kapiti as it serves a market much greater than Otaki and Kapiti Coast itself, particularly given its SH1 location. It s outlet store focus offering goods at discounted prices attracts shoppers from Wellington (to the south) and Manawatu (to the north), as well as through traffic on SH1. Not surprisingly the Otaki Outlet Centre has a very high proportion of retailers in the Clothing, Footwear, and Personal Accessories Retailing sector (45%), significantly higher than any other centre in the district. This is clearly affecting this sector s offer in the Paraparaumu Town Centre, and Coastlands in particular, as is the district s close proximity to Wellington. The Waikanae Town Centre is significantly larger than what the localised Waikanae catchment can sustain, also suggesting many retailers located in Waikanae feed off the SH1 traffic to remain viable. This through traffic helps support the high proportion of Food and Beverage Service stores (37%), but in general the quality of offer and environment of the Waikanae Town Centre is not considered of a good standard comparably (applying today s retail market standards as a yard stick) or relative to the market it primarily services. 23

24 5. BNZ MARKETVIEW RETAIL TRANSACTION DATA ANALYSIS In order to assess the level of retail expenditure flows 'in' and 'out' of the Kapiti Coast District, Property Economics has utilised BNZ MarketView retail transaction data as a representation of the proportion of spending by Kapiti Coast District residents by sector and territorial authority on an annualised basis. BNZ MarketView data is based on the spending and transactions of BNZ credit and debit (EFTPOS) cardholders. It excludes business and corporate cards. The transaction values include GST, but exclude cash out with purchases. BNZ MarketView does not pick up Hire Purchase, direct debit / credit payments or cash based spending. The MarketView data has been collected from numerous New Zealand retailers, from national chains to small independent stores, across a range of retail categories. MarketView data is based on aggregations of BNZ cardholder transactions by origin, destination and store type, these include transactions completed using BNZ EFTPOS and credit cards. BNZ currently holds approximately 20% market share of the electronic card market in NZ. Electronic card transactions accounts for approximately 60% of retail spending within NZ. The retail transactional data sources for the Kapiti Coast District are based on the calendar year periods of April 2012 March 2013 ('origin' of spending) and September 2010 August 2011 ('destination' of spending) to factor in all seasonal variations that may occur. For the purpose of this analysis it has been assumed that the proportion of BNZ cardholder spending, and the proportional split between retail expenditure flows both 'in' and 'out' of the Kapiti Coast District, has remained constant between the two dataset periods. Assessment on 'net flows' has been based on the April 2012 March 2013 'origin' spending data and adjusted September 2010 August 2011 'destination' spending figures to reflect nominal retail expenditure changes between the periods. This is to update the older 'destination' spending data to the same year as the most recent 'origin' spending data so a 'like for like' comparison of the same time period can be made. This way an assessment of District net flow can be determined more accurately. Given the large sample size of BNZ card holders and the prolific use of EFTPOS within NZ, MarketView data is considered to be a robust representation of the Kapiti Coast District spending patterns and hence has been used as a basis for this analysis. Note the proportions in the following section exclude the retail categories of accommodation (hotels, motels, backpackers, etc.) and vehicle and marine sales and services (car yards, boat shops, caravan sales, Repco, Super Cheap Autos, tyre stores, panel beating, mechanical repairs), as these sectors are not considered to be core retail expenditure, nor fundamental retail centre activities in terms of visibility, location, viability or functionality. This is so comparisons with my earlier retail expenditure data can be made. 24

25 5.1. RETAIL LEAKAGE ('DESTINATION' OF KAPITI COAST RETAIL EXPENDITURE) While some retail leakage out of a market can be classified as 'normal' shopping behaviour due to its proximity to major retail destinations in Wellington and Palmerston North, Kapiti Coast District is considered to have a higher than 'normal' level of leakage proportionally on a comparable basis. A high level of retail leakage indicates that the retail needs of the resident population are not being met by the localised market to the level of quality sought, hence residents travel outside of the market to satisfy their retail shopping requirements. This is also driven by employment outflow to other parts of the region. My focus on the MarketView data relates to the higher level proportions of either the outflow or inflow of retail expenditure. Figure 3 below (based on the MarketView 'destination' retail transaction data for the calendar year September 2010 August 2011), illustrates the proportion of retail expenditure generated by Kapiti Coast residents according to where it was spent by local territorial authority and region. 25

26 FIGURE 3: KAPITI COAST RETAIL EXPENDITURE 'OUTFLOW' BY AREA Destination of Kapiti Retail Expenditure Kapiti Coast District 6% 2% 2% 6% 2% Wellington City Porirua City Lower Hutt City 10% Balance of Wellington Region Horowhenua District 71% Palmerston North City Balance of North Island South Island Source: Property Economics, MarketView As indicated in Figure 3, a significant 29% of retail expenditure across all retail sectors generated by Kapiti Coast District residents is spent outside of the district, with a high proportion of this (20%) going to other districts within the region. This suggests that the retail needs of Kapiti Coast residents are not being met by the existing retail offer / centres in Kapiti. The 'bulk' of retail leakage flows south to other Wellington territorial authorities (of which Wellington City accounts for half). Some 6% of retail expenditure leakage from Kapiti Coast District is going to the 'Balance of North Island', particularly the Auckland Region, suggesting possible 'shopping trips' and / or holidays to Auckland with retail shopping forming an important component of the trip. It can be seen that a significant level of retail expenditure generated in Kapiti is leaving the district on an annualised basis (just over $400m). The high level of leakage is fairly consistent across all of the key retail sectors (excluding supermarkets whose spend is more internalised in Kapiti), indicating that leakage is not for 'one-off' shopping trips, but is occurring at a regular rate. 26

27 It is clear many shoppers in Kapiti are voting with their wallets and turning their backs on the local Kapiti offer. While this does not paint a great picture currently, it does represent a significant level of potential within the existing Kapiti market to recapture some of this leakage if the offer, quality and environment were improved in the future. If not, the expressway (under construction) will enable Kapiti Coast shoppers easier access north and south to better quality centres, potentially amplifying the trends outlined in the preceding paragraph RETAIL EXPENDITURE INFLOW INTO KAPITI COAST DISTRICT Figure 4 (based on the MarketView 'origin' retail transaction data for the calendar year of April 2012 March 2013), illustrates the proportion of retail expenditure spent within Kapiti Coast District according to where its consumers reside by local territorial authority and region. 27

28 FIGURE 4: KAPITI COAST RETAIL EXPENDITURE 'INFLOW' BY AREA Origin of Kapiti Retail Expenditure Kapiti Coast District 2% 3% 2% 4% Wellington City Porirua City 6% Lower Hutt City Balance of Wellington Region Horowhenua District Palmerston North City 80% Balance of North Island South Island Source: Property Economics, MarketView In general, Figure 4 shows that a significant proportion of spending, approximately $1 in every $5 spent on retail within Kapiti Coast, is made by residents who reside outside of the Kapiti Coast District. Of the retail spending 'inflow 'into Kapiti Coast, over half is attributable to districts (excluding Kapiti Coast) within the Wellington Region. In particular 6% of Kapiti Coast District's total retail spending is generated from residents residing in Wellington City, suggesting weekend visitors to the beaches / holiday homes is popular and contributes a significant proportion of Kapiti Coast District's retail 'inflow' on an annualised basis, particularly during the summer peak season. It is important to note that the percentages shown in Figures 3 and 4 utilise different base figures as the data is for different calendar years, i.e. total base market size of the 'origin' and 'destination' spending periods are not equal due to the different calendar years they relate to. Therefore the computation of net flows on a proportional basis using simple arithmetic would yield incorrect results as these figures are independent of each other. Property Economics will address this below to determine an appropriate net position for Kapiti Coast District as a result of retail inflows and outflows. 28

29 5.3. KAPITI COAST DISTRICT NET RETAIL EXPENDITURE POSITION Figure 5 graphically shows the retail expenditure flows within Kapiti Coast District as a proportion of the District's total retail spending. Retail expenditure outflow (29% represented in red) equates to the proportion of retail spending generated in Kapiti District but spent outside of the district. Conversely, retail expenditure inflow (17% highlighted in green) illustrates the proportion of retail spending derived from residents living outside of the Kapiti Coast District but spent within the District as a proportion of the total level of retail spending made by Kapiti Coast residents (both within and outside of the district). Internalised spending (71% coloured in blue) represents the proportion of retail spending generated in the Kapiti Coast District, and spent internally within the District. Kapiti Coast Retail Spending Flows FIGURE 5: KAPITI COAST NET RETAIL EXPENDITURE POSITION Net Position, 88% -29.0% 71.0% 17.3% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Outflow % Retention % Inflow % Net Position % Source: Property Economics, MarketView As identified earlier, approximately 71% of retail expenditure is internalised within the Kapiti Coast District at present, meaning 29% of retail spending is 'lost' and spent outside of the District. Figure 5 indicates that the proportion of retail leakage from Kapiti Coast is counteracted by an inflow of retail spending from consumers residing outside of the district. Overall, the Kapiti Coast District experiences a retail spending inflow of 17% relative to total district retail spending. 29

30 Importantly, in terms of a net position for Kapiti Coast District based on the proportions shown on Figure 5, the level of retail expenditure that is spent within the Kapiti Coast District (from both locals and non-locals) is proportional to 88% of what is currently generated in the District on an annual basis, i.e. the Kapiti retail market captures an estimated 88% of what Kapiti Coast District generates in retail expenditure, or there is a net retail leakage of 12% from the district. Figure 6 breaks down the retail expenditure outflows and inflows within Kapiti Coast by area and illustrates them at a finer grain level. The percentages in Figure 6 again represent the proportion of nominal retail spending relative to total Kapiti Coast District retail spending. Net leakage within each identified area can be calculated by inflow less outflow. For example, Wellington City attracts more retail dollars out of Kapiti Coast District on an annual basis than what it injects into the Kapiti Coast market in the order of 4.4% (approx. $26m) relative to generated Kapiti Coast District expenditure ($581m pa in 2015). FIGURE 6: KAPITI COAST RETAIL FLOWS BY DISTRICT -1.7% South Island, 0.9% -6.2% Balance of North Island, 3.4% -1.0% Palmerston North City, 0.9% -1.6% Horowhenua District, 2.0% -0.5% Balance of Wellington Region, 0.7% -2.3% Lower Hutt City, 1.6% -5.9% Porirua City, 2.3% -9.8% Wellington City, 5.4% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Outflow % Inflow % Source: Property Economics, MarketView 5.4. KAPITI COAST DISTRICT RETAIL DEMAND VS SUPPLY This section address what the net retail 'position' of Kapiti Coast District means for both current and future supply vs. demand dynamics over the planning horizon to 2033, which is important for forming my views on the PDP retail provisions. 30

31 TABLE 7: KAPITI COAST DISTRICT NET RETAIL INTERNALISATION Retail Expenditure ($m) $581 $611 $664 $724 $761 Retention (71%) $413 $434 $472 $514 $540 Inflow (17%) $99 $104 $113 $123 $129 Net Internalisation (88%) $511 $538 $585 $637 $670 Source: Property Economics Table 7 determines the estimated Kapiti Coast District market size over the period to 2033 factoring in the retail expenditure flows in and out of the District. The first row in Table 7 identifies the previously determined total market retail expenditure 'pool' in the Kapiti Coast market (refer Table 3 earlier in this report). The next two rows account for the proportion of retail retention and inflow (as determined in Figure 5 of this report) to provide the size of the market retailers in Kapiti Coast District operate in. The Net Internalisation figure of 88% (bottom row) is the available market used as a basis for Table 8. 31

32 TABLE 8: KAPITI COAST DISTRICT SUSTAINABLE DEMAND VS. SUSTAINABLE SUPPLY Sustainable GFA 101, , , , ,580 Less Existing GFA Supply (2011) 96,102 Net Balance 5,122 10,378 19,653 29,976 36,478 Airport LFR Capacity 10,000 Demand Supply Differential -4, ,653 19,976 26,478 Source: Property Economics Table 8 succinctly tabulates the current cumulative retail floorspace provision within the District against the projected sustainable retail GFA. Table 8 also factors in the current estimated net Kapiti Coast District leakage (12%) in retail expenditure based on the assessed MarketView analysis. This provides an insight into the possible under/oversupply of sustainable retail floorspace in the district, and 'flow-on' dynamics in relation to market shopping patterns, as well as the effects of these on Kapiti Coast's current and future retail provision and implications for the PDP. The analysis indicates that, at present, retail supply in the existing environment (existing and consented retail GFA) is greater than sustainable demand in the District by around 4,900 sqm GFA, i.e. there is more 'on-the-ground' and consented retail floorspace in the Kapiti Coast District than the annual retail sales in the district can currently sustainably maintain. Based on the overall quality of the retail offer currently exhibited by retail centres within the Kapiti Coast District, which in my view is considered only low-average quality in many instances, based on Table 8 this means a significant proportion of Kapiti Coast District's existing retail supply is not performing at sustainable productivity levels. This has the effect of lowering the quality of the retail stores and centres in terms of offer, scope, amenity, vitality, built form, and environment. Quality refers to not only the retail products or brands but the entire retail experience and includes elements such as quality of retail environment, store fit-outs, in-store service, physical built form, public realm, parking and access. In today's competitive retail market retail is more than simply buying retail goods or services, but providing a breadth of experience that encourages shoppers not only to visit a centre, but to purchase products and 32

33 visit again and again. While Council may not be able to directly influence all of these elements, its policy framework can have an important influence on the key attributes driving the success of each element. This 'oversupply' in regard to its sustainability and its flow-on effects fuels retail leakage out of the district, predominately to Wellington. This is an important issue for Kapiti Coast District to tackle moving forward if it is to improve the quality, vibrancy, viability, performance and amenity of the retail stores and environments in Kapiti, and in order to improve retail spending retention, or else retail leakage could potentially increase. Taking into consideration the Airport LFR capacity and an allocation for local centre convenience growth, at current market conditions (all things remaining constant), there is enough existing retail floorspace provision within the Kapiti Coast District to sustainably meet the community's requirements until around The importance of growing and attracting national (or international) banner brands to Kapiti Coast, which is realistically only achievable in the PTC, is considered fundamental to improving the performance of the district from a retail perspective and reducing retail expenditure leakage to Wellington. The offer must be compelling, enticing and a gratifying experience for the consumer starting from how people get to and access the centre, to when and how they leave. However, without the key banner retail brands to attract shoppers, many of the other elements identified become less relevant and tend to struggle when working in isolation. In essence for Kapiti Coast, in respect of retailing over the life of the PDP, it s a quality issue rather than a quantity issue that the PDP should focus on addressing. This involves managing retail development, particularly in non-centre locations, to ensure the correct checks n balances are in place to facilitate appropriate retail development occurring in appropriate locations given much of lower quality retail space and environments are in existing centres. This is to ensure new retail development in the district adds to and complements the existing provision rather than takes away and jeopardises the rejuvenation and recovery of the existing retail built form and centres. New retail development needs to provide net positive benefits for the district. 33