What will happen to the Kiwi 'block of shops' in the Costco era?
Friday, 19 December 2025
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Auckland butcher Reuben Sharples is a staunch advocate for the classic Kiwi “block of shops”, and that’s one of the reasons he has bought a block of his own.
Sharples, who is the owner of Aussie Butcher New Lynn, recently bought a retail property in Whangārei. It’s the type of neighborhood shopping block that features local businesses, such as hairdressers, hardware stores, chemists and a dairy.
While there’s no dairy in his block, it’s home to a childcare centre, a private gym, an Indian takeaway, and a jujutsu gym, and it is convenient and easily accessible for people in the area.
Smaller retail properties such as these, and the businesses in them, play an important part in the community, he said.
“It is about convenience, but also local flavour and friendliness versus the uniformity and impersonality of big-box retail type shops.”
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Sharples was keen to move into commercial property because outgoings were paid by the tenant, which was not the case with residential property, and yields were higher, while the residential market had got harder.
He wanted to buy the block his business is in, but his landlord did not want to sell, so he worked with commercial property buyers agents Rethink Investing to secure his Whangārei block for $2.85 million.
“With smaller retail blocks, if you have tenants, such as a hairdresser or a solicitor, they are there for the long-term, and you don’t tend to see many empty shops in them, unlike in places like Broadway in Newmarket.”
It was all about building relationships so good tenants stayed, and the community benefited, he said.
Sharples’ belief in the classic Kiwi block of shops might seem to go against the grain in the current retail environment.
New Zealand has seen the arrival of its first Ikea, and the type of big-box retail the Swedish giant represents is growing in popularity.
US discount retailer Costco recently announced it would be opening its second store in Drury where it will become part of a planned hub of big-box retail stores including new Harvey Normans and Briscoes branches.
International brands will continue to explore opportunities to expand in the New Zealand market, according to Colliers.
Westgate and Drury in Auckland are development hotspots for big-box stores, and new retail parks, such as Berryfields in Tasman, are emerging.
Meanwhile, Jones Lang LaSalle’s latest capital markets report said the broader retail landscape, particularly shopping centres and large format retail, exhibited stronger underlying resilience.
But the changed environment does not spell the end for the small retail blocks that help bind neighbourhoods together.
That’s because they represented opportunities for “mum and dad” investors, such as Sharples, who were looking for alternatives to the residential market, Rethink Group chief executive Scott O’Neill said.
“Small block retail property has been priced down more than any other commercial property sector in New Zealand - far below price correction in many areas. The entry point is often similar to an Auckland house.
“At the same time, it doesn’t have the risk of the office sector, or of high street retail where there’s lots of vacancies. And there’s been very little new building going on, or planned in the small block retail space, so there’s an increasing scarcity of stock.”
O’Neill, who is Australian-based, said those factors made for opportunity, particularly as neighbourhood retail had proved resilient during the Covid era, and tended to have loyal local customers.
The situation was similar in Australia where data showed neighbourhood retail had seen particularly strong growth in yields, he said.
“What happens in Australia tends to influence New Zealand eventually, so there is potential for New Zealand investors to get really good yields on these types of properties.”
But it was critical to get the fundamentals on small retail properties right, he said.
“So you want reliable long-standing tenants, not a tenant who deals in knick knacks and is about to retire without a clear successor.
“You want a space that can be converted easily, you want a block with car parks, and you don’t want to be in an area where there are lots of vacancies, or in a tiny town with just one industry.”
O’Neill said in New Zealand lots of residential investors were selling up and looking for different assets, and also business owners in the market to buy neighbourhood retail properties.
“We are seeing them come through as clients. They are looking for decent returns and cashflow, and there are real opportunities for investors in this space, especially as developers won’t rush into building more of these properties any time soon.”
Rethink Group, which focuses on commercial property, expanded into New Zealand from Australia 14 months ago, with a starting goal of five deals a month, he said.
“We are now doing about seven to nine deals a month, and as the interest rate situation stabilises and the economy picks up further we expect that will filter through to the market in growth.”
The company was doing one or two small retail property deals a month, Rethink’s NZ acquisitions specialist Dylan Menzies added.
“Yields for small retail are about 6.5% on a national basis, and we tend to look for deals sitting in the 6.25% to 6.75% range, but they do differ based on the features of the property, such as age and grade.”