Colliers ?1 I INTERNATIONAL 19!! Mg. .. mm I ll: Ill Ii Ill 0 The Future of Retail Property June 2014 Tough Crowd Where do retailers get their advice? – A StatsNZ Survey Source: StatisticsNZ 82% Existing Staff 48% Conferences 38% Industry Organisations 0% Research Houses Retail Longevity Failure Rates 10% in the last year Source: StatisticsNZ The Path to Purchase Yesterday Today Tomorrow Beyond Radio Television Social media QR barcode Print media Billboards Digital marketing In-store promotions Targeted promotions Near ?eld Trial Er error Inn-line comparison i-cha nnel Media inserts a reviews Social media Social collaboration Samples Experience stoma Augmented reality Dig?al assistant Brick mortar E-commerce Strategic Small format Large tormat Cliclt collect Pop-up store Specialised Pure-plat:r Integrated channels l[lash register Wireless card Phone transfer Near ?eld corn ms Card Ewallets Mobile PBS Cash-less Printed coupon Digital voucher Integrated PDS device Bimetri? Comm unity word of mou?'t Social media Personalised service Media reviews lngrated channels met-I ln-store service Call centre service Review bio-gs Multi-retum points Integrated Source: Deloitte Colliers Less of this Source: cbc.ca Less of this Source: Wikipedia Colliers More of this .. . .. . i I . ?s JV 5' no?, i ?a II . Source: Destination Elite More of this Colliers INTEFH The personalised touch UR w. I I .E (gust noon. on 1? 2 *0 Luswt 0' noun. new! Colliers INTERNATIU P-JAL For customers searching for value - - THEREWILL ALWAYS BE SOMEONE WHO SAYS THATTHEY CAN DO IT BUT AT WHAT INT AT DMAL yam-warehouse? LoginJRegister Help Track Order lei Books Clothing DVDs Electronics Gaming Gifting Homewares Music Toys SeeAll StoresaHours CurreiItMailers Homepage News 8? Information The Warehouse App See All Categories News at Information I a A . I Szhoo Tex. I . ?i2?ew Po rte 1e en?pio't A new way to shop your warehouse/I your way Christmas You can download it now forAndroid and Apple devices 2-: Res: Ccce Click. C- on the . App Store See All Categories Why get the App? Because it saves you time and money. You can ?nd thousands of products including electronics. homewares. apparel, health beauty, entertainment. toys and much more! The Warehouse Shopping App is convenient. fast and secure. Plus you can i Price check products Simply scan the oarcode with scan function of the app and. if the product is online. it will show you the price. and even iet you Know if it is on deal! No need to search fora once checker any more. As an added bonus. if you ?nd the identical product in any another retail store, you can cross check The Warehouse price on the spot 7 that way know you are getting the best possible price when you shop at The Warehouse Use the wishlist If there are products that you really want, out you aren?t ready to buy them yet_ add them to your wishlist so they are easier to ?nd when you want them Plus if they I go on deal while they are saved in your wishlist, we wiil let you know so you can save on the items you realiy want Find a store nearby When you visit the app store locator it will automatically zoom into the map at your current location This makes it really easy for you to ?nd The Warehouse store closest to where you are Once you ?nd the store you want to visit simply tap on it to ?nd out the address, opening hours and phone number Your Order Security 8 Payment Stores Customer Services Corporate Track Order Security Store Finder Contact Us About The Warehouse Group Deliverv Privacy Current Mailers FAQs Investor Relations Source: thewarehouse.co.nz Colliers Not searching for car parks Source: Wikipedia The digital natives Source: Easyreadernews Online Shopping Household Use of ICT Percent of Total NZ Population 80 70 60 INDIVIDUALS WHO MADE ONLINE PURCHASES IN THE LAST 12 71 68 MONTHS 58 52 49 50 40 33 30 20 10 10 0 15–24 Source: StatsNZ, Colliers International Research 25–34 35–44 45–54 55–64 65-74 75+ The proliferation of technology ?h 3 a. a Age of Smart Appliances MITSUBOSHI ELECTRIC I - . HEAT Roan Tm Sol Tompcutulc Fan Speed Source: eMarketer, Accenture, Colliers International Research Colliers INTERNATIONAL nl?lmm- :1 12:32 PM Slideshow Remote? Slideshow Remote? The perfect tool for presentations A a Slideshow Wi-Fi Windows Remote PowerPoint 25 of 100 - 00:01 :30 Asia Pacific will Overtake the World Asia Pacific 0% 2011 2012 North America 10% 20% 27.9% 30.5% 2013 2014 2015 2016 Source: eMarketer, Colliers International Research 33.4% 36.2% 38.2% 39.7% Western Europe 30% 40% Eastern Europe 50% 35.9% 60% Latin America 70% Middle East & Africa 80% 28.0% 33.5% 26.9% 31.5% 29.7% 28.8% 28.2% 25.7% 24.3% 23.4% 22.6% 90% 100% Mobile = mobility? NUMBER OF RESPONDENTS USING MOBILE WHILE... 90% 81% 80% 70% 60% 50% 40% 30% 20% 10% 0% Lying in Bed Source: eMarketer, Accenture, Colliers International Research Keeping online in context  1 in 20 sales in New Zealand are online, or 19 out of 20 offline.  In the US: 72% showrooming, but 78% webrooming* *Accenture Consumers won’t go far Cumulative Share of Auckland Household Spend Spend Category (kms) 50% 60% 80% 90% Automotive 5 7 14 23 Core Retail 7 9 16 23 Food and Liquor 4 5 9 15 Hospitality 6 9 15 22 Medical Services 16 19 27 36 Other Retail 7 9 17 24 Other Store Types 7 10 18 26 Personal Services 7 10 19 27 Recreation 8 10 16 23 Total 5 7 13 22 Source: Auckland Council, Colliers International Research The ins and outs Shopper Inputs Money Time Angst Source: Herb Sorensen, 2009 Retailer Outputs Items Satisfaction Changes in the Path to Purchase What does this mean for Property? Retail Indicators We’re in a protracted retail spending recovery 170 Late 70s oil shock Index (Peak=100) 160 Early 1990s recession Asian Financial Crisis 150 Latest recession 140 130 120 110 100 90 1 5 9 13 Quarters from peak Source: StatsNZ, NZIER, Colliers International Research 17 21 25 Retail Indicators Not just in New Zealand New Zealand 6.0% Australia AUS 17-year average of 3.9% 5.0% NZ 17-year average of 4.5% 4.0% 3.0% 2.0% 1.0% Source: StatsNZ, ABS, Colliers International Research 2014Q1 2013Q4 2013Q3 2013Q2 2013Q1 2012Q4 2012Q3 2012Q2 2012Q1 2011Q4 2011Q3 2011Q2 2011Q1 2010Q4 2010Q3 2010Q2 2010Q1 2009Q4 2009Q3 2009Q2 2009Q1 -1.0% 2008Q4 0.0% 2008Q3 Annual Percentage Change in Retail Sales 7.0% Retail Indicators Spending by Category Supermarket and Grocery Stores High Street Retail Bulk Retail 10% 5% -5% -10% Source: StatsNZ, Colliers International Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 0% Dec-09 Annual Percentage Change in Retail Sales 15% Retail Indicators More retail space of all types – an Auckland example LFR (>450m²) 6,000,000 5,000,000 SFR (<450m²) SFR = 2m² per person LFR = 1m² per person 4,000,000 3,387,027 2,953,861 3,000,000 2,436,109 2,000,000 1,000,000 1,427,109 1,730,416 1,984,171 2021 2031 0 2013* Source: Auckland Council, StatsNZ, Colliers International Research *Usually Resident Population from Census 2013 Area Units Retail Indicators Actual Retail Sales by Region Auckland Waikato Wellington Remainder NI Canterbury 11% 12% 14% 13% Mar-14 Quarter (Outer Ring) 33% Mar-10 Quarter (Inner Ring) 23% 9% 20% 10% 11% Source: REINZ, MBIE, Colliers International 9% 35% Remainder SI Retail Indicators comers Toun'sm Source: internet search tourists, see colliers for sources Retail Indicators Auckland Household Expenditure Forecasts Food & Non-Alcholic Beverages Alcoholic Beverages & Tobacco Clothing & Footwear Housewares & Furniture Energy & Telecommunication Services Recreational Equipment & Services Personal Care & Miscellaneous 2031 2021 2016 2013 $0 Source: StatsNZ, Colliers International $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 Retail Indicators Growth in retail sales is an important metric for retail real estate 11% Auckland CBD Prime Retail Yield Sales per head of population -200 -1,200 Yield (invetred) 10% 9% 8% -2,200 -3,200 7% 6% 5% -4,200 -5,200 4% 3% 2% Source: StatsNZ, NZIER, Colliers International Research -6,200 -7,200 s.a retail sales per head of population 12% Retail Indicators Product distribution shaping the industry 10.00% Auckland CBD Retail Yields -600 ANZ heavy traffic index (inverted) 9.50% -700 9.00% -800 8.50% -900 8.00% -1000 7.50% -1100 7.00% -1200 6.50% -1300 6.00% 5.50% -1400 5.00% -1500 4.50% Mar-03 Mar-04 Source: ANZ, Colliers International Research Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 -1600 Mar-14 Colliers INT EFIN ATIDHAL Storage distribution Retail Indicators Customer pull Overall CBD Shopping Centre 6.0% 5.0% Vacancy Rate 4.0% 3.0% 2.0% 1.0% 0.0% Jun-13 Source: Colliers International Research Dec-13 Jun-14 Dec-14 Retail Indicators Rental growth on its way CBD Prime Regional Centre Bulk Retail $3,000 Sub-5% growth Net Face Rent ($/psm) $2,500 $2,000 Forecast $1,500 Sub-10% growth $1,000 $500 $0 Source: Colliers International Research Sub-30% growth Retail Indicators Retail Investor Confidence Auckland Wellington Christchurch 80% 60% 40% 20% -40% -60% -80% -100% Note: Net Positive Source: Colliers International Research Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 -20% Dec-08 0% Retail Indicators Retail and Industrial at record lows Auckland Prime Yields Office 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% Source: Colliers International Research Auckland Prime Yields Industrial Auckland Prime Yields Retail Retail Indicators NZ Sales over $2m Commercial Mixed Office Retail Industrial 4,500 Value of Sales $(millions) 4,000 3,500 3,000 2,500 $974m 2,000 $624m 1,500 1,000 $1,049m 500 $288m Source: Colliers International Research 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 0 Retail Indicators NZ Sales under $2m Commercial Mixed Office Retail Industrial 3,000 2,500 2,000 1,500 $902m 1,000 Source: Colliers International Research 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 0 $247m $160m 1990 $434m 1989 500 1988 Value of Sales $(millions) 3,500 Summary Structural changes and ever-evolving trends will keep impacting retailers More floor space needed in the future, but some winners and some losers Investors will morph further into value hunters as yields reach record lows Is there change on the horizon? Retail Indicators On the horizon – ‘household’ net wealth 1,200,000 Household financial liabilities Housing value Household net wealth Household financial assets 1,000,000 800,000 $million 600,000 400,000 200,000 0 -200,000 -400,000 1978 1982 1986 1990 Source: StatsNZ, RBNZ, Westpac, Colliers International Research . 1994 1998 2002 2006 2010 As at December Quarter 2014 2018 2022 2026 2030 Retail Indicators Retail’s link with housing 10 Retail sales, LHS House sales growth, 6 months earlier, RHS 60 8 40 6 Annual % change 2 0 0 -20 -2 -4 -40 -6 -60 -8 -10 2000 -80 2003 Source: StatsNZ, REINZ, NZIER, Colliers International Research 2006 2009 2012 Annual % change 20 4 Colliers INTERNATIONAL Disclaimer Whilst all care has been taken to provide reasonably accurate information within this presentation, Colliers International cannot guarantee the validity of all data and information utilised in preparing this research. Accordingly Colliers International New Zealand Ltd, do not make any representations of warranty, expressed or implied, as to the accuracy of completeness of the content contained herein and no legal liability is to be assumed or implied with respect thereto.