It’s a state-of-the-art retail and hospitality centre opening in the jaws of a recession. Michael Andrew takes a look at the hurdles and hopes for the new billion-dollar Commercial Bay.
Earlier this week, two days before its official launch, the Commercial Bay development in downtown Auckland opened for a discreet preview. A small group of guests wandered through the precinct’s Melbourne-inspired laneways, surveying the newly built facades of boutique retailers while scores of construction staff worked frantically in the background, hammering away the finishing touches on the $1b project.
Upstairs in the Harbour Eats food court, the guests were served champagne and canapés and mingled closely, abandoning the physical distancing that, until the day before, had been a government requirement. Scott Pritchard, CEO of Precinct Properties – the owner of Commercial Bay – toasted the occasion.
He spoke of the development’s eight year journey, lamenting the delays and lauding the efforts of the retailers that had helped bring the project to fruition. It was a celebratory speech that dwelled little on Covid-19 or the massive recession which looms. For a brief moment, the complex problems bearing down on New Zealand’s retail sector seemed insignificant.
In reality, Commercial Bay is opening amid the onset of the most severe economic crisis since the great depression. By most accounts, the impact on New Zealand retail will be devastating. Stories of redundancies and business closures across the country are becoming more routine than the government’s Covid-19 media briefings. One particularly grim report forecast 65,000 jobs could be lost in the retail sector, and over 17,000 businesses could be forced to cease trading.
Additionally, Auckland’s high-end retail is both a competitive and saturated market, with Westfield’s flagship Newmarket mall opening late last year and Sylvia Park currently in expansion mode. There were questions over whether the city could sustain three retail developments on that scale before the crisis, let alone with tourism on hold for the foreseeable future.
When The Spinoff spoke to Pritchard from Precinct Properties, he said he was “hopeful” but acknowledged that the circumstances surrounding the launch were less than ideal.
“When we started building four years ago we probably would have preferred not to be opening amid a global pandemic. But at the same time you’ve got to play the cards you’re dealt,” he said.
For a highly anticipated development like Commercial Bay, the cards could certainly be much worse. From the outset, it has been billed as a world-class destination, a place with a distinct focus on quality in both its design and its concentration of retail and hospitality offerings. Pritchard was hopeful that this point of difference, along with the location in a nexus of major office buildings would be enough to help it overcome the formidable challenges ahead.
“Yes, the economic environment isn’t as strong. But the thing is, we have a mix that’s really unique and it offers visitors an experience they won’t get somewhere else. It’s not what you’ll find in a typical shopping mall. And I think at this stage Aucklanders and New Zealanders can’t travel, so if they want to get a taste of something that’s world class, they can now do that in Auckland.”
It’s true that Commercial Bay is unlike a regular New Zealand shopping mall. Other than its internationally inspired décor, what distinguishes it is its retailers and outlets. Alongside global brands like Tommy Hilfiger and Scotch & Soda, the precinct hosts a number of emerging boutique New Zealand retailers like Elle + Riley and Edmund Hilary. Pritchard said the emphasis on small domestic brands would allow Commercial Bay to become a destination in the national push to buy local.
It’s a compelling pitch, yet it’s far from guaranteed. Despite the enthusiasm for domestic products, there have already been some notable business casualties, including those with stores in Commercial Bay. Earlier this week New Zealand fashion brand Ingrid Starnes announced that it would be closing its retail arm as a result of the Covid-19 downturn and the debt it took on to open the new store in the precinct.
Crane Brothers owner and Heart of the City executive committee member Murray Crane said such closures were inevitable, especially with businesses that had become distressed as a result of the lockdown.
“All retail is under pressure and I think there’s probably a few people in there that if they had their time again or had the choice, they probably wouldn’t be doing it in this climate.”
Although he felt the launch of Commercial Bay was a positive show of confidence and a progressive move for the CBD, he said many of the precinct’s niche retailers geared towards the tourism dollar would be particularly at risk, especially with the nearby cruise ship terminal sitting empty.
Nearly 240,000 passengers disembarked in Auckland last year, spending around $192m. While Commercial Bay was never pitched exclusively toward those customers, their absence will not go unnoticed. “You can’t replace that can you?” said Pritchard. “And you have to be realistic about that, it’s not as if there’s going to be someone else to step in and fill that void.”
Just how much the missing tourism would affect demand in Commercial Bay, Pritchard couldn’t say. However, he believed that the many thousands of office workers less than a few minutes walk away would be a major source of revenue. In any case, he said Precinct Properties was in it for the long haul and was committed to supporting its tenants through the down patch.
“We’re working really closely with our retailers and we’re very determined to see them all succeed over the next six months. Precinct is not a developer in the sense that it builds something and then sells it. We’ve always looked at this building as a 50 year asset. It sits right among five other office buildings that we own and we’re thinking about this on a very long-term basis.”
While he wouldn’t go into detail about what support would be available to retailers, he didn’t rule out rent relief if it came down to it.
“There’s a range of support … I think you could ask any of them and they’d confirm that we’re doing things to help all of them. They’re all now really excited about getting the doors open and they’re all really optimistic about the location.”
Excitement is certainly what Commercial Bay will be fostering to propel its initial business. Positioned to capture the alert level one revelry and with Prime Minister Jacinda Ardern scheduled to cut the ribbon, its opening has come to symbolise the hopes for a quick bounce out of the recession.
According to Timothy Hazledine, professor of economics at the University of Auckland, the launch of Commercial Bay is the perfect signal to inspire confidence in New Zealanders and show them that the economy is on the road to recovery.
“This sort of exciting, big retail event is just what we need to get people into the CBD to buy stuff. Of course, it will be tough without the tourists and cruise ships, but if the developers think they can afford it, well, thank you very much!
“They’re going to have to be prepared to sustain losses for a few months. Retail is a risky business, but it’s a matter of the developers and entrepreneurs holding their nerve, making things happen until normal trading resumes.”
As for the precinct’s businesses, all of those The Spinoff spoke to shared the same excitement – and nerves – about entering into such an unpredictable market. In the Harbour Eats food court, Pablo Nicolas Prusso, co-owner of the South American Oven, said the move to Commercial Bay was a big step from Waiheke Island’s Ostend Market, where the business had been based for the past seven years.
“We were ready to do something else, and we needed to take the next step,” said Prusso. “It feels a little bit different from how we were supposed to be opening before, but we always say if you have a lot of love in what you do, then somehow you’ll succeed. I know the time is not the right time but we know what we’re doing, we love what we’re doing, we’re confident and we’ll get there.”
Aaron Styles, who has opened his flagship Just Another Fisherman clothing store on the second floor with his partner, said it was normal to be nervous. However, his confidence had been bolstered by the support of Precinct Properties.
“They’ve been amazing,” he said. “We don’t have this place without them and they don’t have this place without us, and that’s why we’ve made so much effort on our first store in a place that we believe in. It’s been a long process and they’ve kept the communication up and they’ve been there. They want it to grow, it’s a cool thing to be a part of. Scary, but cool.”
Like other business owners, Styles said he was prepared for demand to be slower as a result of the vanished tourism market. But Commercial Bay was a long term project and he intended to be there once trade starts to improve.
“I definitely think we’re not going to boom like we hoped but we’re going to be here for the long haul. I’m just a big believer in ‘if you work really hard and put a lot of effort in and have a good calm nature, good things will happen’.
“You’ve just got to work through the harder things and usually you’ll come out the other side.”
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