‘The more economic activity in one location the better’ mantra pays off for Kiwi Property

Tuesday, 1 July 2025

Kiwi Property’s Sylvia Park shopping centre in Auckland is a prime example of the company’s mixed-use strategy.

Rent increases in the retail property sector are sustainable when the property is located in premium assets such as Sylvia Park in Auckland, Kiwi Property Group says.

The NZX-listed commercial property group turned in a strong rental performance over the 2025 financial year with net rental income up 5% (to $194.1 million) across its portfolio, shareholders at its annual general meeting on Tuesday were told.

Adjusted funds from operations were down by 7%, largely due to higher finance costs and a tax increase resulting from the removal of tax depreciation on commercial buildings.

But resilience in valuations contributed to an improved profit after-tax performance, with a $57m net profit compared with a net loss after tax of $2.1m in the 2024 financial year.

Kiwi Property chief executive Clive Mackenzie said given how sluggish the economy had been, the company was pleased to have continued to maximise the day-to-day operational performance of its assets.

Kiwi Property’s Clive Mackenzie says retail foot traffic has continued to increase at the company’s assets.

Total rental growth from mixed-use, office and retail leasing activity was up 4.3%, and there had been significant rental growth, from new leases (up 6.1%) and existing tenants’ rent reviews (up 3.7%), he said.

“Our mixed-use assets were particularly robust performers, which offset the slower office and retail leasing markets.”

There was an 8.3% uplift in leasing spreads for new lease deals in the mixed-use portfolio, led by The Base in Hamilton and the Sylvia Park precinct which underscored strong tenant demand at those high-performing centres, he said.

“Positively, foot traffic continues to increase at Kiwi Property’s assets, proving the attractiveness of our assets as destinations, even at a time when many New Zealanders’ purse-strings are tightened.

“While spending overall has been lower due to the recessionary environment, we believe our assets are well-placed to recover strongly, particularly now factors influencing retail spend have improved, including a reduction in both inflation and interest rates.”

One shareholder asked how sustainable retail rent increases were given the current economic environment.

Kiwi Property chair Simon Shakesheff said the occupant-cost ratio in retail had moved up to about 15% over the last few years, but it was not uncommon for the ratio to up around 17% across the company’s Australasian peers.

Retailers need to have a presence in premium shopping centres, Kiwi Property’s Simon Shakesheff says.

The company had been getting growth in a soft environment, and the retail scene had also changed, he said.

“Retailers now need to be online and to have a physical presence, and that presence needs to be in the best assets, like Sylvia Park, and many retailers are aware of that.

“So we feel that rent growth is sustainable at a rate similar to our peers, and that there’s probably a bit more upside on that front.”

Shakesheff said the exposure of the company’s mixed-use assets to positive population, retail and rental trends would continue to underpin its strategy, and leave it increasingly well-positioned.

“Sylvia Park has proven to be the best proof-point to date of the mixed-use strategy, highlighting the benefits of taking a long-term approach – starting with strategic land holdings near transport and population growth nodes, and adding quality retail, office, and now residential to the community.”

He pointed to the opening of Resido, the company’s first build-to-rent development, as a key milestone in Sylvia Park’s evolution into a world-class mixed-use precinct.

“As at 30 June, 266 of the apartments were leased, representing 90% of the total development, and the lease-up performance to date is at the faster end of our 12 to 18-month lease-up target.”

Residents in Kiwi Property’s build-to-rent development, Resido, are big spenders at nearby Sylvia Park.

The strong leasing performance had occurred in a subdued residential rental market, and showed the asset had been well received by potential tenants, he said.

“A recent survey indicated that Resido residents each spend over $21,000 per year at Sylvia Park, equivalent to annual sales of more than $8m based on 400 residents.

“This demonstrates the benefit to the wider Sylvia Park precinct of having residents living on site.”

Barbara O’Connor, from the Shareholders Association, asked what Kiwi Property would do once it completed its mixed-use strategy.

Shakesheff said the more economic activity there was in one location the better it was for everybody, and if a company owned an asset well-located from a transport perspective there was great potential.

Sylvia Park was a good example, he said. It was an asset that grew from nothing to New Zealand’s leading shopping centre and then to a larger precinct with the addition of two office buildings and Resido.

“Looking at our assets we have years and years of opportunities ahead of us. At Sylvia Park, there’s the opportunity for more offices, and at The Base there were opportunities to add different uses.

“It feels like we are in the early part of the process with this strategy, not coming to the end of it.”