Background and Conclusions

McDermott Consultants Ltd P.O.Box 183 Matakana Auckland 0948 NEW ZEALAND Telephone +64 9 4227710

14 June 2013

Phil Stickney Associate Director, Planning Boffa Miskell PO Box 91 250 Auckland Dear Phil Ruakura Retail Centres This letter has been written in support of the Tainui Group Holdings Ltd (TGH) and Chedworth Development Ltd application for a Private Plan Change to advance the first stage of the Ruakura Structure Plan included in the Proposed District Plan (Section 3.7, Volume 1) through the release of 389ha of development land within the Structure Plan area. It deals in particular with the scale and scope of the provision made for retailing within the Structure Plan area. The analysis and conclusions below draw on my review of the provisions in the Proposed Hamilton District Plan (PDP) for retail and centres development as described in my report Review of Retail Planning and Development in Hamilton (“the Retail Review”, June 2013). This report compares the operative and proposed district plans; examines the grounds for the PDP objectives, policies and methods; analyses trends, drivers and developments of Hamilton’s retailing between 2000 and 2012; and reviews relevant international literature with respect to reviving town centres and the future of retailing.

Background and Conclusions Having completed a preliminary review in February 2013 I agreed to support the TGH request for a zone change for the principal retail centre proposed for the Ruakura Growth Cell (the “Ruakura Centre”) from “neighbourhood” to “suburban” (PDP, Policy 3.7.1.5). I completed the review and then assessed the drivers of development of the Ruakura retail centre and its likely space needs. An assessment of the likely role of a retail centre and projecting potential sales and floorspace demand confirms the need for substantially more retail land in Ruakura than proposed in the PDP. It supports a suburban centre zoning within the Plan Change to reflect its likely function and scale. It is not anticipated that this change in zoning will have a significant detrimental effect on any existing retail centres. The major centres (CBD, Ruakura, and Chartwell) have distinctive functions which they are expected to sustain provided the City continues to grow. There may be some impact on the timing and scope of development or redevelopment of suburban centres in the southeast of the city (including Hillcrest and the planned Peacocke centre). However, these should be accommodated through normal of investment planning. The analyses behind these conclusions reveal some uncertainty around planning for retailing and associated uses. Unforeseeable changes in the drivers of demand and supply may influence how and where retailing develops in Hamilton, including Ruakura, in ways we cannot predict. The resulting uncertainty needs to managed in a manner that: (1) enables diverse uses including business services, recreational amenities, and hospitality as well as retailing to locate in the Ruakura Centre as part of a commitment to business development over the growth cell as a whole; (2) ensures efficient development and use of infrastructure in an integrated manner; and (3) avoids imposing undue hurdles to accommodating activities that are not currently anticipated.

Summary of the Retail Review In the following paragraphs I summarise some of the major findings from the Retail Review that underlie my analysis of the Ruakura Centre. PDP Policy Documentation There is no evidence in the technical and planning documents preceding the PDP of a causal link that might justify policies to constrain investment in subregional and suburban centres as a means of protecting or promoting “the vitality and vibrancy” of the city centre. Such policies risk unduly constraining city-wide investment. This would reduce the income of Hamilton as a whole, which, perversely, would be detrimental to the CBD that they are intended to promote. Demand for and Supply of Additional Floorspace Capacity in current centres and planned new suburban centres is sufficient to meet foreseeable demand for additional retail floorspace at the city-wide level. Projections of possible demand and retail structure provide no grounds for promoting undue expansion of commercial land beyond that. Equally, they offer no grounds to support micro-managing development by enabling the council to influence directly what retailing might take place where, when, and at what scale (except to ensure that resource management standards are met). Slowdown in the CBD The decline in CBD employment since 2006 has been most pronounced in business administration. Consequently, retailing’s diminishing role is as much a consequence as cause of restructuring in the CBD as a cause. A decline in retailing is simply the local expression of central city restructuring being experienced in New Zealand and internationally. This may have been accelerated by the global Financial Crisis. However, a falling share of retailing in the centre is also consistent with what appears to happen as cities grow. It is significant that the rapid retail growth experienced outside Hamilton’s city centre in the latter part of the decade (after 2005) followed the reversal of CBD retail employment trends (in 2004). This undermines the suggestion that growth in the suburbs precipitated the decline of central city retailing, which is the basis for PDP policies intended to constrain retail growth in centres elsewhere. Rather, the expansion of retailing in suburban and city edge centres is a consequence of city growth generally, the associated decentralisation of population and employment, and changes in both retailing and consumer behaviour, rather than the result of the relocation of CBD retail capacity. CBD Dominance and Revival The CBD still remains the dominant retail centre in Hamilton. This is consistent with it being the most accessible location (alongside Five Crossroads). Moreover, there are signs of a significant revival with a pick-up in investment in new CBD retail floorspace and redevelopment since 2010. For example, Kiwi Income Property Trust is investing a reported $40m in upgrading the Centre Place shopping precinct in the heart of the CBD. A second stage comprising the redevelopment of nearby Downtown Plaza and incorporating a cinema upgrade is currently underway. The nearby McConnell Properties Citygate/PWC Building is due to open in the middle of 2013 and is already fully leased. This includes 613sqm of ground floor retailing and café space. A new Countdown supermarket has recently been completed on Bridge Street at the southern end of the central city, and the nearby Pak’nSave on Tristram Street has been extended. This uplift in retail investment in the CBD is appears to be a positive response to competition elsewhere. It is also be part of a revival marked by the construction of some 9,000sqm of new

quality office space (the PWC Centre and Project Grantham) in a CBD where A grade space has been lacking. Either way, the current round of central city investment confirms that declining retail performance in the CBD in the latter part of the past decade cannot simply be attributed to improving performance outside it. Retail Review Conclusions The Retail Review advanced five general conclusions relevant to the PDP which are repeated here. (1) Is promoting and preserving a hierarchy a useful retail planning method? Constructing and enforcing a hierarchy for retail planning in Hamilton is not justified by the evidence and seems unnecessarily limiting. Zoning new capacity in planned growth cells and retaining the capacity of existing centres appears an appropriate response to retail growth prospects. Concerns over the detail of what might occupy that capacity and where stores should go can be managed simply by applying structure planning and (if necessary) plan change processes that respond to changes in the role or circumstances of individual centres within a flexible zoning regime rather than implementing policies aimed at retaining a particular (and arbitrary) hierarchy over the long term. The (2) Does the growth of retailing in other centres harm the CBD? The relatively poor performance of the CBD may be self-correcting as indicate by a lift in investment since 2010. If it is having an effect, then, competition from other centres is promoting CBD recovery, or at least advancing the process of retail renewal. Experience elsewhere suggests that such renewal will lift the role of relatively small scale, high value, boutique, and specialty stores in the CBD. (3) What effect might we expect from policies to limit retailing outside the CBD? The overall outcome of selectively restrictive policies could well be less economic activity in the city, less efficient retailing, and higher costs to consumers. The negative impact on employment and incomes resulting from policies limiting the scale and form of retailing outside the CBD can undermine its commercial and social functions if stymying growth elsewhere reduces investment, income, and jobs city-wide. This in turn will reduce demand for the goods, services, and amenities in the CBD. At best such policies will be ineffective, but they could also prove counterproductive. (4) What planning is needed to promote the CBD? Non-regulatory initiatives might better promote the vitality and vibrancy of the CBD. Hamilton already has a self-funding Business Improvement District covering the CBD which is operated by the Hamilton Business Association in association with the Council. A correction to yields and the redevelopment of Centre Place (among others) should also promote further private investment to parallel civic investment in the public domain and amenities in the central city. Effective transport planning, traffic management, and public transport to enhance accessibility and movement around the centre will help. Planning might best contribute by providing for flexibility of use, promoting high standards for the built environment, and recognising the benefits of a compact CBD for such desired outcomes as walkability and attractive inner city living. Among other things, this may mean limiting rather than extending the area of central city commerce. (5) How to plan for an uncertain retailing future? A planning policy which pre-empts diverse and changing retail practices, some of which cannot be easily anticipated, risks distorting, deferring, or deflecting development at a cost to the retail sector and the city’s residents. The review of retail performance and prospects in Hamilton suggests that increasing rather than reducing flexibility is likely to lead to better social and economic outcomes. In this respect, a shift away from the flexibility of the Operative District Plan and increased intervention in economic processes raises significant policy risks under the Proposed District Plan.

Implications for Ruakura Based on these conclusions the point can be made that while there are connections between location, accessibility, and performance within a network of commercial centres, changing individual circumstances shape their individual development. Allowing them to develop in response to local needs and market opportunities (subject to satisfactory environmental outcomes) is more efficient in resource management terms than trying to enforce a hierarchical structure across them. This is particularly the case for the Ruakura Centre given that it will uniquely serve both business and residential demand. Expectations of substantial business investment and employment growth around it mean that it will be a distinctive centre in its own right. The findings of the Retail Review and the principles derived from it are applied in an assessment of planning needs for the Ruakura Centre in the following pages.

The Ruakura Structure Plan Through the PDP the Ruakura Structure Plan provides approximately 389ha for inland port, freight, logistics and other (light industrial) employment and approximately 77ha for research and innovation. This adds to the Waikato Innovation Park, and reinforces the presence of AgResearch and proximity to Waikato University. The Structure Plan provides for a principal retail centre of close to 4.0ha with approximately 1.5 ha of retail floor space as currently denoted in concept plans. The Structure Plan also provides capacity for approximately around 1,800 households, or perhaps 4,500-5,000 people. Provision is made for a small neighbourhood centre embedded within the Medium Density Residential Area in the northern part of the plan area. The current concept plan provides for 0.57ha at this location, and 3,500m2 of retail floorspace (although the Proposed District Plan limits this to 1,500m2). The Proposed Zone The PDP zones the Ruakura Centre Neighbourhood Centre (Business 7). It also states that the Centre is intended to meet local household demand and “perform a role as the principal focal point for research and innovation activities and for … a future passenger transport interchange” (PDP, p.3-44). It is proposed “to make provision for locally based retail activity, centred upon a ‘Main Street’ and public Plaza, incorporating a potential passenger transport hub to the central city” (PDP, p.3-47). The PDP defines neighbourhood centres as follows: “neighbourhood centres provide a limited range of everyday goods and services and essentially serve a walk in population. Being situated within residential areas it is essential that the range and scale of activities is compatible with neighbouring residential activity and local amenity values. Very limited opportunities exist for expansion of these centres. “Neighbourhood centres are small in land area and shop size between 100 and 300 m² with the overall floorspace for a centre between 500 and 5,000 m². The anchor store is likely to be a superette” (Volume 1, pp.6-7, 6-.8).

This very limited role does not align with the diverse roles of the planned Ruakura Centre. The B7 zone does not accommodate its likely functions as the centre of a substantial employment area which itself includes a major logistics node, a research and development precinct, and the high tech industry associated with a centre of innovation. The multiple functions proposed, a significant secondary residential catchment (given anticipated growth to the east and north of the city and in Ruakura’s eastern hinterland as well as housing planned under the Structure Plan), retail demand

from local businesses, the demand for goods and services associated with local employees, and a transport hub jointly make the constraints on development under a Business 7 zoning inappropriate. The Appropriate Zone The Ruakura Centre should be subject at the least to the provisions associated with suburban centres generally (Business 5, Suburban Centre Core, Business 6 Suburban Fringe) and those provided for other growth cells (Rotokauri, Rototuna, and Peacocke). Indeed, its role is likely to be even more diverse and potentially more expansive than the roles of these centres. Suburban centres are described in the PDP as anchoring: “the City’s main residential areas and [providing] a range of activities and services that can reduce reliance on car travel for meeting day-to-day requirements. These centres provide multi-purpose destinations for customers. Parking is provided onsite and these centres are generally well served by passenger transport. “Suburban centres vary in size and character between 10,000-20,000m² gross floor area and generally serve between 10,000-30,000 people. Supermarkets commonly anchor these centres and between 20-30 outlets, comprising a variety of smaller specialist retailers, provide retail, limited office, community and other services to the suburban population on an integrated basis. Often another large format retailer is located in the centre. Service stations may also be a feature. “Opportunities exist for limited expansion and intensification to ensure the centres continue to meet the needs of growing populations and provide a focal point for communities”. … “Carefully planned suburban centres will help to anchor and support residential and community development” (Volume 1, page 6-7). While the residential catchment may be smaller than in other growth cells, the Ruakura Centre will cater for a substantial daytime community (business and employment) population. Business 5 and 6 may suffice for the associated retail and related activity, although even they may be insufficient.

Planning for a Network of Centres To help understand where the Ruakura centre might fit within the network of Hamilton’s centres an analysis has been undertaken of the land areas provided for suburban and neighbourhood centres in the PDP.1 (For some suburban centres adjoining parcels of Business 5 (suburban centre) and Business 6 (suburban fringe) land were combined, and in two cases proximate neighbourhood centre land was included in a suburban centre). Thirteen suburban centres were identified, with a collective land area exceeding 53ha, a mean size of 3.1ha, and a median of 3.2 ha. The size distribution is skewed towards the current and future larger centres of the northern suburbs, with three intermediate centres in the central area, and smaller ones in the southern suburbs. Some 63 neighbourhood centres were also identified. These range in area from 460sqm to 13,200sqm. The average size is 3,400sqm but the median just 1,700sqm, denoting the small size of the majority and the variability among them. They are widely dispersed, more prevalent in older suburbs (north of the central city and to the west). There is little apparent provision for neighbourhood centres in growth cells which have, however, provision for substantial suburban centres. (Ruakura is the exception). The implication is increased reliance development on larger, integrated suburban centres with more variety and choice of goods and services than neighbourhood centres.

1 This GIS exercise was undertaken by Boffa Miskell, Auckland, drawing on planning maps and additional information provided by Hamilton City Council.

Table 1 Suburban Centres, Proposed District Plan

Centre Zone Area (Ha) Rototuna Suburban Centre Business 5 9.5 Thomas Road Business 5 7.4 Rotokauri Suburban CentreBusiness 5 7.1 Frankton Business 5 5.4 Dinsdale Business 5 and 6 4.7 Hamilton East Business 5 and 7 4.5 Peacocke Suburban CentreBusiness 5 3.2 Five Cross Roads Business 6 and 7 2.6 Hillcrest Clyde St Business 5 and 6 2.5 Chartwell Suburban CentreBusiness 5 2.2 Glenview Business 5 1.8 Nawton Suburban Centre Business 5 1.4 Hillcrest Cambridge Rd Business 5 0.8 53.2

Plotting the size of individual suburban and neighbourhood centres raises questions about using a hierarchy to inform planning. First, there are no obvious thresholds that would normally be associated with hierarchies. The only break in the size distribution across suburban and neighbourhood centres is created by the distinction between larger new suburban centres in the northern suburbs and established suburban centres elsewhere. Second, the break imposed by the PDP hierarchy between smaller suburban centres and larger neighbourhood centres appears arbitrary, with the Hillcrest Cambridge Rd suburban centre, for example, smaller than the ten largest neighbourhood centres. The most distinguishing feature of the majority of neighbourhood centres is the lack of capacity for their physical expansion, even if local demand does increase (for example, through residential intensification and infill housing in existing suburbs). Hence, much local demand growth will need to be absorbed in suburban centres, one effect of which may be to change the activities conducted in neighbourhood centres (perhaps through a shift to lower-rent activities). The growth of suburban centres will take place mainly in the planned new centres, although some existing centres may have some capacity to intensify or redevelop. Given this evidence the planning methods intended to manage the distribution of retailing across centres on the basis of hierarchical relations among them appears ill-founded. Fixing the boundaries in a hierarchy and consigning centres permanently to one level or another fails to reflect the combined impact of changing local circumstances and wider structural changes in commercial activity on individual centres. Instead, land use controls might best reflect the effects (and desirability) of continuing development based on individual centres’ capacity and circumstances, rather than on determining and seeking to fix in place through regulation where any one centre sits relative to others. This also confirms that even if the at 1.77ha as provided in the PDP, the Ruakura Centre is larger than any other neighbourhood centre (Business 7), quite apart from the conclusion of the current analysis (below) that even that is too small an area given the likely retail demands associated with the development of Ruakura.

The Size Distribution of Zoned Suburban and Neighbourhood Centres

If a distinction is to be maintained across the network, Ruakura Centre should be rezoned as a suburban centre. Even then, it may be appropriate to provide for even more diverse functions than provided for in Business 5 and 6 zones given its location, surrounding land uses, and the likelihood that it will serve a combination of business, employee, and household needs.

Implications of the Ruakura Structure Plan for the Retail Centre Imposing Business 7 zoning with its activity and scale constraints risks discouraging or excluding activities desirable for the likely role of the commercial and retail centre given the objectives and scope of the Ruakura Structure Plan. The presence of hospitality options (other than fast-food outlets and cafes), and cultural, recreational, and entertainment amenities in the Centre will help create an environment that is attractive to employees and provides local organisations and their visitors opportunities for meeting formally and informally. Restricting commercial activities like bank branches is also contrary to plan objectives that include providing “a significant new employment area based around the development of a regional logistics hub”, maximising the use of existing infrastructure, and creating “opportunities for the ongoing development of research, learning and innovation activities” (PDP, Volume 1, 3-44). The benefits of large format retailing and show-rooms providing office furniture and supplies (stationery, electronic goods) increase from integration into a planned retail centre. Equally important, in a predominantly business locality there is likely to be a need for health, medical, and even emergency services, industry training facilities geared towards the needs of an industrial and scientific complex, and professional and financial services (legal, accounting, finance). Ideally, such services will be located in or adjacent to the Ruakura Centre to ensure their accessibility and visibility, and to manage their effects. Such activities should not be unnecessarily restricted in scope and scale or obliged to occupy (and thereby remove from the market) land intended for industry, transport, scientific endeavour, or research and development. Even if some of these non-retail, final demand uses could be catered for elsewhere in Ruakura, the level of amenity and accessibility in the centre will be enhanced if they can co-locate around an attractive main street in a reasonably planned and integrated commercial environment.

Estimating Possible Retail Need In order to establish possible land requirements for the Ruakura Centre an estimate was made of future retail demand (including cafes and restaurants) based on anticipated expansion of housing and the growth of employment in the Structure Plan area. No particular time frame was adopted for this estimate for two reasons. First, structure planning and integrated development require that design provisions (land use, infrastructure, and urban form) are projected in general terms for the fully developed centre. In other words, in progressing the first part of a development through, for example, master planning, care needs to be taken to retain the integrity of the total plan which will be realised only over a longer time frame. Second, the precise rate of development cannot be forecast because it is subject to a range of largely unpredictable external factors that will determine the uptake of capacity by households and businesses (economic growth, business cycles, demographic shifts, including migration, etc). Household Spending The Ruakura Structure Plan provides for approximately 1,800 residences. Based on the Household Expenditure Survey (Retail Review, pp.67-69) this would translate into around $35m of retail spending a year generated within the Structure Plan area at full development.

Workplace-based Spending Substantial demand can also be expected as a result of business and related activities in and around Ruakura. The land use analysis by Traffic Design Group prepared as part of structure plan development adopted generally conservative estimates of job density (either employees per hectare or gross floor area per employee) which led to estimates of some 3,640 jobs in the structure plan area by 2041, and 9,150 when fully developed. While these are supply- rather than demand-based estimates (reflecting land availability and plan rules on staging rather than possible growth in demand for the output of the relevant logistics, industrial, and scientific sectors), the area allocated is consistent with expectations arising from the Castalia analysis of the viability and scope of a logistics centre oriented towards the ports of Auckland and Tauranga. 2 Workplace based expenditure reflects local business demand for retail goods and services (e.g., for office equipment and supplies) as well as local spending on convenience goods by employees. It may also reflect expenditure on personal and household items by employees if retail trips are combined with work trips. Consequently, major employment areas may become a focal point for retail development in their own right. One example is the Airport Shopping Centre at Auckland International airport (which also serves travellers and nearby residents). Another is the development of a 25,000m2 commercial centre (The Crossing) serving Highbrook, a 107ha industrial park in East Tamaki, Auckland. It has become a practice in the development of industrial (and commercial) estates to provide significant retail and associated amenities in business parks to support investment and employment. Facilities might include a supermarket, personal goods and services, household goods and services, entertainment facilities, accommodation and catering, gymnasia, and medical facilities, thus serving both daytime (work-place based) and night-time (household-based) demand. The attraction such a centre holds for investors in industry was explained by the Auckland-based manager of a leading New Zealand firm operating internationally: “The US does business parks really well. A site has got to be affordable to be viable but it also needs much more to make it attractive. It needs to have character and a centre. A good industrial area will have a commercial precinct with cafes and restaurants, a warehouse and electronics store for staff shopping, etc, something to make it worth staff being there”. (Prospects and Possibilities - North West Sector Group 1 Business Land Demand, Working Paper Prepared for Rodney, Waitakere, and North Shore Councils, McDermott Consultants 2010) In order to produce an indicative figure covering final demand spending associated with a substantial business-zoned area the average expenditure per employee ($6,640/year) used by Property Economics in its 2010 assessment of land needs for Future Proof has been adopted. This figure aligns broadly with the annual average spending estimate by office workers published in 2012 by the International Council of Shopping Centres (US$6,710). Applying it to estimated employees suggests that at full development business-related retail spending could be around $61m.

2 The final figure compares with an estimated 11,100 direct and indirect jobs required by 2061 “to operate the inland port facility and work at the co-located businesses” (Castalia, June 2013, (National Significance of the Ruakura Intermodal Terminal, pp.13-14),

Spending, Floorspace and Land Required Putting these two sources of spending together (local households and employees) suggests that at full development the Ruakura Centre could attract $95m of spending. 3 If the average sales per square metre stays at around the (low) base level adopted for projecting total Hamilton floorspace requirements in the Retail Review ($4,200), this would generate a need for some 22,700sqm gross floor area. If, as is expected, higher productivity prevails, the demand for floorspace will be reduced. By way of illustration, sales of $6,000/sqm would generate demand for 15,900sqm in total. On the basis that any new investment in retailing will be at substantially higher productivity levels than those currently prevailing in Hamilton, the latter floorspace productivity figure is used for the balance of the analysis. The area required to house demand for 15,900sqm gross floorspace depends on the net land yield; i.e., the area available for building once provision has been made at subdivision and site individual level for infrastructure services, roads, parking, and open space. For present purposes it is assumed that subdivision results in a 70% site yield, and that average building coverage averages 60% a site. This leads to a relatively intensive building footprint of 42% across the centre. Applied to 15,900sqm it gives rise to the need for 3.8ha to cater for future retailing and food and beverage services alone.

Contingencies While this projection of potential retail land required by the development confirms the need for Ruakura to be treated as a suburban centre, the precise figure is subject to considerable uncertainty. Contingencies that might influence the final outcome are discussed below. A Centre of Business By proposing Business 7 zoning the PDP overlooks the important role the Ruakura centre will play at the heart of a new industrial and high tech zone. Indeed, arbitrarily limiting the functions that might be fulfilled by a Main Street development in this setting could reduce the rate of investment and employment growth below what might otherwise be achieved. An important strategic strength of Ruakura for business will be the quality of its commercial centre. Under-providing will reduce the important non-retail uses that might locate there and lower its attractiveness to potential investors and employees in the area. In terms of efficient urban development, under-providing for retailing also undermines the potential to contain retail trip-making by local employees and residents on the site. In addition, unduly limiting the size of the Centre and activities that might locate there will reduce its capacity to provide a setting and amenities conducive to business collaboration among local occupants, their visitors, and other users at Ruakura. It also ignores likely demand in this locality for higher order business-related services, including professional offices, training facilities, and the like. On these grounds, and on the grounds of the breadth of activities that might take place in this centre, more rather than less floorspace and land area (and flexibility of use) is required compared with what might be concluded from a simple extrapolation of potential retail spending.

3 In the city-wide analysis conducted in the course of the Retail Review additional allowance was made for a net 20% spending gain from outside the city, reflecting the results of number plate surveys and an analysis of spending by MarketView Ltd. This has been reduced to zero for Ruakura on the assumption that any such gain will be incorporated into the spending estimate for local employees.

Spending Levels The household spending levels used here are considered conservative, with no provision for increasing real expenditure over time or the prospect that new suburbs in close proximity to the university, science- and innovation-based businesses are likely to be populated by households earning above average incomes and with higher than average spending profiles. Similarly, there is likely to be a large share of skilled and relatively highly paid employees working in the area, potentially lifting levels of employment-related spending above the average. Given the difficulty of projecting the sector and occupational mix of future employees, however, the figures adopted for the analysis can be accepted as the current best, if conservative, estimate. Spending Mix Given its location at the heart of a modern industrial environment there will be demand for a wider mix of activities at the Ruakura Centre than associated simply with household demand for retailing. It is important to the success of the entire development that a reasonable level of amenities and services for employees is catered for in the centre environment. A number of activities therefore could be relatively low density uses, including show-room, recreational, entertainment and catering activities, potentially lifting land requirements. Floorspace Productivity New retail investment can be expected to achieve turnover per square metre well above the prevailing average. This is even more likely when shops are meeting demand from multiple sources – local households, local employees, and business. While it might be expected that there will be some bulky goods stores operating from larger premises with relatively low sales per square metre, overall the higher productivity assumed ($6,000/sqm) is more likely than the lower. Leakage No provision has been made for additional floorspace associated with capturing sales from outside the catchment (other than any that might be implicit in local spending by employees commuting from outside the city). As a suburban centre, however, Ruakura should attract spending from a secondary catchment east of the city. It may also attract it from nearby eastern and particularly south-eastern suburbs as the most accessible or as a preferred retail centre. On the other hand, given proximity to the central city, a higher proportion of local spending may be attracted away from Ruakura than might be the case elsewhere. On balance, making no adjustment to allow for possible gains from outside the primary business or household catchment other than those associated with commuters (captured in employee spending) is a conservative basis for estimating land needs. Site Coverage A reasonable area of quality public space over and above road corridors will generally reduce subdivision yield, while generous provision for landscaping and parking will reduce site coverage. Given location within a modern employment setting, a high level of amenity is to be expected. On these grounds an estimate of 42% building footprint may be too high. The requirement for land for the retail component alone at 50% (rather than 60%) site coverage would be 4.5ha. Moving to multi-story establishments with services on the first floor may help intensify development without over-building the site and without lifting land demand significantly above that identified for retailing (in this case, 4ha).

Overview On balance, a figure of 4ha for a suburban centre in Ruakura is likely to be a minimum requirement, even allowing that some of the local demand will be met at the planned neighbourhood centre in the north of the Structure Plan area (comprising 0.57ha). A larger commercial centre would recognise the role of non-retail uses (personal, business, and professional services, hospitality, health, and fitness) associated with a concentration of business and employment, and provide greater design flexibility. More generally, planning should be sufficiently flexible to enable the Ruakura Centre to cope with different outcomes, accommodate diverse demands, and become a positive part of the infrastructure of an area intended to be a major focus of employment growth. This will not be achieved if the area provided and associated zoning for the Ruakura retail centre are too restrictive.

Staging Development Staging rules are presented in the PDP (Vol 1 Page 3-52, 54 and Volume 2 Page 2-20) allocating increments of residential and industrial development over fifty years (Table 2). The main drivers of staging, especially between 2021 and 2041, are infrastructure requirements, mainly relating to transport connections back to the city’s arterial roads. Table 2 Principle Staging Parameters, Ruakura Structure Plan

Innovation Park & Industrial Logistics Inland Port Residential Knowldege Zone <81ha <200 units <20ha<80ha <100 in General & Medium Density Zones Stage 1A Stage 1 transport connection to Gordonton Rd to be established.

Stage 1B <175 units before connection from southern Stage 1 (to 2021) 1 (to Stage Sites A (AgResearch), B boundary to Gordonton Rd roundaout Structure Plan Area fully connected to (Waikato Innovation Park), city network and D(Waikato Univerity) Connection to be established between allowed Industrial Park and Logistics Zone Connectionfrom industrial park to Gordonton Rd roundaboutt and <1,427 units provided connections in place

Stage 2 (2021-2041) 2 Stage General Residential Zone to be <116ha in total to be developed

<2011ha to be developed Site C (Greenfield) Allowed Stage 3 2041-61

The Risks of Staging It is important that the staging programme can be modified to allow for variations in the provision for road connections and underground services. This is to avoid the opportunity costs of holding land in an undeveloped state when it could be supporting intensive economic activity. An over- extended development timeframe effectively creates a deterrent for investors in infrastructure, land development, buildings, and business. It is important for efficient economic development that infrastructure can respond to the growth of demand for capacity as and when required, rather than being used to control and potentially discourage investment. Staging as a method of rationing land at any given point in time or to “fill up” one area before allowing progress in another may be construed as anti-competitive. It risks increasing land prices and thereby reducing investment and overlooks the potential for different areas to develop in parallel in response to different drivers.

The Difficulty of Predicting Demand The Retail Review and projections prepared for this statement illustrate the wide variety of outcomes that can be projected depending on the underlying assumptions. Trying to project the rate of growth at Ruakura in sufficient detail to provide predictions of when more capacity might best be brought on is even more fraught. The difficulty of forecasting a demand timeline is compounded by the fact that Ruakura will benefit from two distinctive streams of growth which might operate on quite different timeframes: an expanding science- and innovation based production and service centre alongside a growing purpose built freight and logistics node. Among other things, this duality could see growth well ahead of expectations based on historical trends. There are no authoritative projections available of the likely rates of growth in these sectors and the associated timing of their demand for land. It is important, therefore, that the land allocation timetabled in the PDP should be treated as indicative rather than definitive, and its development should not be scheduled over the long-term (over, say, ten years) on the basis of planning rules. The key to planning under these circumstances may be the commitment to critical pieces of long- term infrastructure without predetermining precisely when they might be required in the medium- to long-term. Rather, they can be triggered by particular events, by short-term growth prospects, or by individual developers prepared to carry the cost of bringing them forward to support a given investment. Evidence of emerging demand can be used to progress them at an appropriate time. Implications for the Ruakura Centre Interestingly, no staging rules are proposed in the PDP for the Ruakura Centre itself, despite it being a key part of the commercial infrastructure for the Structure Plan area. This is consistent with the view that provisions made for capacity should reflect maximum likely demand, but that development should progress in concert with the expansion of the activities that it will serve. Ideally the physical framework of the centre will be established at the outset as a key element of the structure plan on which new activities, businesses, and households in the area will draw. It is important, then, that the Centre’s progress is not impeded by undue delays arising from the application of the restrictive rules pertaining either to neighbourhood centres or to arbitrary staging of the wider development which it will serve. The most constructive approach may be to adopt the Structure Plan to manage development, under the umbrella of a flexible suburban business zone of sufficient size to meet its multiple roles and accommodate the Ruakura Centre’s likely diverse final demand activities, primarily but by no means limited to retailing.

Impact on Existing Retail Centres The Issue of Trade Competition The Resource Management Act 1991 explicitly excludes consideration of trade competition or the effects of trade competition in the preparation of or changes to a district plan (s74(3)). Nevertheless, Policy 6.15 of the Proposed Waikato Regional Policy Statement requires that: Management of the built environment in the Future Proof area shall provide for varying levels of commercial activity to meet the wider community’s social and economic needs, primarily through the encouragement and consolidation of such activities in existing centres of commercial activity,

The inference is that while competition is not to be considered (including competition among landlords and investors as well as trading entities), the impacts of new investment should not cause such disruption to existing centres as to generate unacceptable environmental outcomes or in some way discourage or impede consolidation of commercial activity in existing centres.

Having raised that prospect, recent evidence of renewed investment in central Hamilton suggests that even the apparently adverse short-run effects of competition – such as the redistribution of sales across stores and centres and the consequent decline in some businesses and centres – can lead to positive medium- to long-term effects. In effect, a competitive response to new capacity elsewhere is to increase investment and thereby modernise existing centres. The Ruakura Centre’s Contribution to Retail Growth In any case, if Ruakura Centre is fully developed for retail activity as projected (15,900sqm), this would amount to 17% of the additional Hamilton City floorspace projected through to 2031 under medium household growth and high retail productivity assumptions (Table 19, Retail Review), or 12% under the high population growth assumptions (or between 3.6% and 4.0%. of all retail space). In other words, while Ruakura Centre may be a significant component of retail growth in Hamilton, it will remain a minor part of its total commercial infrastructure. Possible Impacts on Other Centres Any impact on other centres will be influenced by the current distribution of retail capacity relative to population. This is illustrated at a general level in of Table 3, which allocates the 2012 estimates of resident population, employment, and retail floorspace (based on Quotable Value New Zealand Retail – CR – and liquor sale – CL –categories, and the distribution and size of the city’s integrated retail malls. This demonstrates a general imbalance between the distribution of population and jobs and retail capacity, with the former oriented to the east of the Waikato River, and work and retailing to the west. Hence, the eastern, south-eastern and southern sectors collectively account for 43% of the population but only 205 of jobs in 2012, and just 11% of retail capacity. The imbalance in the growing suburbs of the northeast appears even more marked. Table 3 Distribution of Population, Employment and Retail Floorspace, 2012

Residents Employees Retail Area Jobs/100 SqM/ Sector Number Share Number Share SqM Share Resident Person Northeast 38,450 26% 4,650 6% 22,791 5% 12 0.6 Te Rapa 390 0% 13,940 19% 152,337 32% 3,574 390.6 Northwest 410 0% 2,310 3% 0 0% 563 0.0 North City 39,250 27% 20,900 28% 175,128 37% 53 4.5 West 31,720 21% 3,120 4% 22,333 5% 10 0.7 Central Suburbs 9,790 7% 16,880 23% 34,009 7% 172 3.5 Hamilton Central 3,200 2% 18,900 25% 184,855 39% 591 57.8 Central City & Suburbs 44,710 30% 38,900 52% 241,197 51% 87 5.4 East 24,110 16% 4,720 6% 16,455 4% 20 0.7 Southeast 24,480 17% 9,400 13% 29,003 6% 38 1.2 South 15,260 10% 1,065 1% 7,041 2% 7 0.5 South & Eastern City 63,850 43% 15,185 20% 52,499 11% 24 0.8 Total 147,810 100% 74,985 100% 468,824 100% 51 3.2 The development of Ruakura Structure Plan and within it the Ruakura Centre offers the opportunity to correct both these sources of imbalance through the additional employment expected to be located there and through the creation of a significant suburban retail centre. It is unlikely that the additional retail capacity at Ruakura will have a significant impact on any individual centre. The CBD, Chartwell, and The Base are each specialised centres in their own right, subject to different growth drivers (except to the extent that they all rely in part on expanding city- wide population and income). The Ruakura centre is also likely to be distinctive, as its development will be shaped by location in a largely industrial and technology focused employment precinct, and that it will cater to the needs of businesses and their employees in the area.

There may be some influence from the development of the Ruakura Centre on the scope and timing of investment in other suburban centres, especially in the south and southeast. Putting aside the dominance of the CBD and Te Rapa (each with large retail centres and limited local populations) Table 3 shows that the areas with the lowest floorspace per resident are in the south and northeast, with 0.5 and 0.6sqm/person, respectively. (The figure for the city as a whole is 5.5sqm/person). The areas east of the river (northeast, east, and southeast sectors), which are most likely to be impacted by the development of Ruakura, account for 59% of the city’s population, 25% of its jobs, and 15% of retail floorspace. This gives rise to just 22 jobs per 100 residents, and 0.8sqm of retail floorspace per resident. While it can be expected that the Rototuna Centre will offer some correction to this imbalance in the north, this is less likely in Peacocke in the south given that Stage 2 of the Peacocke Structure Plan (in which the suburban centre sits) is not yet included in the Council’s Long Term Plan. The development of a successful centre at Ruakura could conceivably influence the final scope and timing of development at Peacocke to the extent that providing additional capacity accessible to residents of Peacocke Stage 1 in the interim it would defer pressure to commence the suburban centre there. These possible impacts of development at Ruakura on other nodes in the retail network of are considered to be minor. Indeed, they could well be positive, both to the extent that they precipitate competitive investment in existing centres and to the extent that the successful development of Ruakura Structure Plan area will rebalance the current imbalance between residential and workplace location, and contribute significantly to the growth of Hamilton City. Not only is it important to provide adequate capacity for the Ruakura Centre to effectively service this development, but it seems important that it should be able to cater for a variety of uses in quality retail, hospitality, and service environment. This will not be achieved under the neighbourhood zoning provided for in the Proposed District Plan. Yours sincerely

Philip McDermott Principal McDermott Consultants

Retail Planning and Development in Hamilton

A Review Prepared for Tainui Group Holdings Ltd Planning Version 1

McDermott Consultants Ltd

June 2013

Retail Planning and Development in Hamilton A Review Prepared for Tainui Group Holdings Ltd Planning Version 1 June 2013

McDermott Consultants Ltd PO Box 183 Matakana Auckland 0948

The information in this report is presented in good faith using the best information available to us at the time of preparation. It is provided on the basis that McDermott Consultants Ltd and its associates are not liable to any person or organisation for any damage or loss which may occur in relation to that person or organisation taking or not taking action (as the case may be) in respect of any statement, information, or advice conveyed within this report.

Contents Summary 1 Introduction 6 1.1 Objective 6 1.2 Outline 6 2 Retailing and Centres in the Proposed Hamilton District Plan 7 2.1 The Proposed Hamilton District Plan 7 2.2 CBD Focused Business Policies 9 2.3 Proposed Changes in Business Zone Planning 10 2.3.1 The Operative District Plan 10 2.3.2 The Proposed District Plan 11 2.4 The Retail Hierarchy 12 2.5 The Distribution of Business Land 14 2.6 The Centres 16 2.6.1 Suburban Centres 16 2.6.2 Neighbourhood Centres 18 2.6.3 Conclusion – How Helpful is the Retail Hierarchy? 18 2.7 Differentiating Suburban and Neighbourhood Centre Activities 19 2.8 Conclusions 21 3 The Rationale for Planning a Retail Hierarchy 22 3.1 The Policy Trail 22 3.2 The Waikato Regional Retail Strategy 23 3.3 Future Proof Growth Strategy and Implementation Plan, 2009 25 3.4 Proposed Waikato Regional Policy Statement, 2010 27 3.5 Technical Background Document Hamilton Urban Growth Study 29 3.6 Variation 21 to District Plan, September 2009 31 3.7 The Hamilton Urban Growth Strategy June 2010 33 3.8 Future Proof Business Land Reconciliation 33 3.9 Section 32 Analysis, Proposed Hamilton District Plan 34 3.10 Conclusions 35 4 The Changing Distribution of Retailing in Hamilton 37 4.1 The Analytical Framework 37 4.2 The Data 38 4.3 The Questions 38 4.4 The Recent Picture 39 4.5 Population and Employment Growth 41 4.6 Population 42 4.6.1 Recent Trends 42 4.7 Employment Trends within Hamilton 44 4.7.1 Changing Central City Employment 44 4.7.2 The CBD Experience Elsewhere 46 4.7.3 Separating Central City from City-Wide Changes 48 4.7.4 The Nature of Decentralisation 49 4.8 The Retail Sector in Hamilton 50 4.8.1 Retail Employment Overview 54 4.9 Recent Trends in Retail Investment 54 4.10 Changing Land and Capital Values 56 4.11 The Impact of Location and Accessibility 59 4.12 Conclusions 62 5 Projecting Retail Demand 64 5.1 Estimating Future Retail Demand 64 5.2 Current Estimates of Hamilton Retail Spending 65 5.3 Land Requirements 67 5.4 Conclusions 68 6 Future Possibilities 69 6.1 Planning to Regulate Retail Investment 69 6.1.1 A return to mono-centric cities? 69 6.1.2 Growing incomes and increasing suburbanisation 69 6.1.3 The Push to Intensification 70 6.2 Planning to Restore the Central City 70 6.2.1 Decentralisation 70 6.2.2 Large Format Retailing 72 6.3 The Counter-Movement – International Experience 73 6.4 Options for Hamilton 75 6.5 Retail Developments 76 6.5.1 The Web – a Retail Game Changer? 77 6.6 Conclusions 78 7 Conclusions 80 7.1 Is promoting and preserving a hierarchy a useful retail planning method for Hamilton? 80 7.2 Does the growth of retailing in other centres harm the CBD? 81 7.3 What effect might we expect from policies to limit retailing outside the CBD? 82 7.4 What planning is needed to promote the CBD? 83 7.5 How to plan for an uncertain retailing future? 84 References

Tables Table 1 Status of Commercial Activities, Operative District Plan 11 Table 2 The Current and Projected Hamilton Retail Hierarchy 12 Table 3 Business Zone Areas in the Operative and Proposed District Plans (Hectares) 14 Table 4 Suburban Centres, Proposed District Plan 16 Table 5 Allocation of Census Area Units to Geographic Sectors 38 Table 6 Floorspace Estimates for The Retail Hierarchy 40 Table 7 Population and Employment Distribution, Hamilton 2006 and 2012 41 Table 8 Non-Primary Sector Employment Changes in the CBD, 2000-2012 45 Table 9 Shares of City Employment in the CBD, Six Cities 46 Table 10 Structural Shifts in the Central City, Six Cities 2006-2012 47 Table 11 Shifts in Food Retailing Employment, 2000-2012 52 Table 12 Shifts in Non-Food Retailing by Category, 2000-2012 52 Table 13 Leading Sectors by Centre and Suburbs 53 Table 14 Consents for New Buildings and Alterations, 2001 to 2012 55 Table 15 Value of New Retail Building Consents Issued, 2001-2012 56 Table 16 Distribution of Retail-Mixed Floor Area and Population, 2000, 2006, and 2012 57 Table 17 Retail-Mixed Floorspace and Values, 2012 57 Table 18 Estimates of Retail Spending and Floorspace in Hamilton 66 Table 19 Projected Demand for Additional Retail Floor Space, 2011-2031 67 Table 20 Estimating Land Area Requirements 68

Figures Figure 1 The Distribution of Floorspace across the Retail Hierarchy, 2006 and 2012 13 Figure 2 Business Zones in the Operative and Proposed District Plans 15 Figure 3 The Size Distribution of Zoned Suburban and Neighbourhood Centres 17 Figure 4 Distribution of Suburban and Neighbourhood Centres 18 Figure 5 The Retail Policy Trail: Analysis, Strategy and Policy Documents 23 Figure 6 Principal Shopping Centres, Hamilton 40 Figure 7 Population Trends and Prospects by Geographic Sector, 1996 to 2031 42 Figure 8 Hamilton Arterial Road Network 43 Figure 9 Total Employment Shifts by Area, 1996-2031 44 Figure 10 Charting Decentralisation from the CBD, 2006-2012 49 Figure 11 Retail Employment Shifts, 2000-2012 50 Figure 12 Food Retailing Employment Shifts, 2000-2012 51 Figure 13 Non-Food Retailing Employment Shifts, 2000-2012 51 Figure 14 Value of Retail Building Consents, 2000-2012 54 Figure 15 Trends in the Value of Land and Improvements 58 Figure 16 Relative Value by Sector, $ Improvements per Hectare 59 Figure 17 Retail Centres and Census Area Units, Hamilton 60 Figure 18 Changing Market Accessibility, Sixteen Centres, 2011-2013 61 Figure 19 Estimating Retail Demand Using the Household Expenditure Survey 64 Figure 20 Retail Spending in Hamilton - Projected Annual Compound Growth Rate 66

Summary This report considers the provisions made for the development of a retail centre hierarchy in in the Proposed Hamilton District Plan (PDP). It considers how this will be implemented and compares the provisions for business development in the PDP with those in the Operative District plan. It examines the “policy document trail” underlying the more prescriptive approach adopted in the PDP. It seeks to establish the causal reasoning which links the recent performance of the CBD to competition from subregional and suburban centres in a way which can be moderated by the proposed rules. It reviews recent evidence of retail activity and investment to establish how consistent PDP provisions are with what has been happening in the market recently. It also reviews recent and future prospects in the retail sector to establish how practical it might be to implement policies and rules aimed at retaining a largely historical retail structure across centres in the face of potential shifts in the nature of retailing generally. The Policy Trail The analysis of retail supply and demand which informs the PDP was undertaken in 2009 with a review of data in 2010. The Waikato Regional Retail Study distinguished three tiers of centre within Hamilton city on the basis of size, catchment, and function: three major centres (the CBD, The Base, and Chartwell); 12 suburban centres; and 15 neighbourhood centres. It concluded that the capacity of these centres, including provisions made for centres in the growth cells was more than sufficient to accommodate growth in demand for the next 20 years. The Proposed Waikato Regional Policy Statement called for development of the built environment in an “integrated, sustainable and planned manner”. It also advanced the principles of making effective use of existing infrastructure and taking up opportunities for urban intensification to minimise the need for greenfield development and reduce private motor vehicle use. The technical report underlying the Hamilton Urban Growth Strategy advanced an integrated and citywide approach through spatial planning. It attributed the “poor performance” of the CBD to a lack of financial benefit from locating there, leading to rental levels insufficient to support refurbishment or redevelopment, falling pedestrian counts, and “lack of activity, energy and vitality”. A number of responses were proposed to reinvigorate the centre and attract specialty goods and services to it. These include encouraging housing in close proximity and maintaining activities “within walking distance of the retail heart”. The Strategy also suggested that “efforts need to be directed towards attracting activity back into the CBD to increase its competitive position”, revealing a view that CBD performance is a function of competition from other centres and based on the physical relocation of business from there to other parts of the city. At the same time, the Strategy anticipates consolidation of the CBD retail role with it serving “the southern half of Hamilton city” and The Base serving the northern half. Proposed Variation 21 to the Operative District Plan advanced zone changes to promote the CBD, differentiating between a flexible commercial service zone around the CBD and a more restricted general commercial service zone elsewhere. It also suggests that the rapid growth of the Te Rapa corridor is a cause of the slowdown in the CBD and that “a continuation of this trend enabled by the current district plan provisions would undermine the overall performance of the CBD and its enabling role in terms of helping local communities continue to meet their social and economic needs”.

Draft Hamilton Retail Review - Summary i The Hamilton Urban Growth Strategy subsequently suggested that some 50% of new dwellings would be provided “through regeneration of existing parts of the city, focus around the CityHeart, transport hubs, town centres and areas of high public amenity”. The Section 32 analysis underlying the proposed district plan also promotes a centres-based business hierarchy and advances the need to avoid the development of The Base, Chartwell, and suburban centres from undermining “the primacy, vitality or viability of the central city”. The Changing Distribution of Retailing in Hamilton Population and Employment The second section of the report outlines the changing distribution of retailing in Hamilton between 2000 and 2012. Among other things the analyses demonstrate the decentralisation of population and employment, with areas north of the CBD (Te Rapa, Chartwell, and north-eastern and north-western Census Area Units, CAU) accounting for 56% of Hamilton’s population growth between 2001 and 2001, and 48 % of job growth Current plans suggest that growth in the northern part will shape the city over the next 10 to 20 years. Together with the development of the city bypass (State Highway One) and the eastern arterial route, this directional development will continue to favour The Base as a regional centre and Chartwell as a subregional centres and support new suburban centres in Rototuna and Rotokauri Employment Trends City-wide employment grew strongly from 2000 to 2006, but then fell between 2006 and 2012. Only Te Rapa and University CAUs recorded gains throughout. The northern CAUs (Te Rapa, the north-east and north-west) accounted for 48% of job growth from 2000 2012. The central city recorded much slower growth in the first six years, followed by a decline between 2006 and 2012. While it is easy to suggest that a CBD downturn is related to the contraction of retailing, the slowdown in the CBD in fact predates the opening of The Base. Also, the greatest job loss in Central Hamilton since 2006 has been in business administration and support services, offsetting rapid growth in the preceding six years. Retailing only accounted for 29% of the net loss of employment from central Hamilton. IUN fact, it may make more sense to argue that the decline in CBD retailing results from the contraction of the central city generally, rather than retail underperformance explaining the area’s weak performance. The Central City Experience – Six New Zealand Cities Comparison of Hamilton’s central city employment with New Zealand’s five other large cities (Auckland, Hamilton, Tauranga, Wellington, Christchurch – up to 2010 – and Dunedin) shows that employment decentralisation is by no means unique to Hamilton. The concentration or otherwise of retailing in the central city appears to be a function of size. This suggests that as Hamilton grows it can expect a further reduction in the central city’s retail role. Nevertheless, 25% of all jobs in Hamilton are in the central city. This contrasts with Auckland’s 14% at one end of the scale, and Wellington’s exceptional (in New Zealand) 37% at the other end. However, the centre’s 30% of all Hamilton’s retail employment sits behind Tauranga’s 36% and Dunedin’s 35%.

Draft Hamilton Retail Review - Summary ii Equally significant is the relative share of all CBD employment in retailing. In Hamilton the figure is 13%, close to Tauranga and Dunedin. In the larger centres it plays a much smaller role, accounting for 4% of CBD employment in Auckland, 6% in wellington, and 8% in Christchurch (pre-earthquake, 2011). Investment in Refurbishment and New Buildings Retail building consents can be treated as a proxy for investment. The value of consents since 2000 confirms that retail development is following population growth with investment favouring northern suburbs. It has also responded to the availability of lower cost land and integrated development at Te Rapa Chartwell also underwent some expansion and refurbishment during the decade. The city centre had reasonable levels of retail investment until the middle of the decade when they fell. The value of consents has since recovered, including new retail buildings. This implies that under more buoyant economic conditions CBD investors are still likely to respond positively to growth opportunities even as additional investment takes place in sub-regional and suburban centres. If anything, A perceived increase in competition may stimulate the reinvestment required to promote the CBD even if the share of retail investment and sales there continue to decline. Responding to Step Change – the International Experience Concerns about the decline of city centres have been widespread and adopting planning policies to support them a common practice. Analyses of city centre decline identify changes in the pattern of retailing associated in part with disruptive new forms, as well as the simple impact of ageing infrastructure, outmoded building stock, and a deteriorating physical environment. Department stores were a disruptive influence – a game changer – reshaping city-based retailing in the inter-war period of the 20th century, and through the 1940s. The emergence of climate controlled, centrally managed suburban shopping malls from the late 1950s on also had a profound influence on retailing. More recently large format stores and associated power centres, often on or beyond the urban fringe or in industrial areas have seen retailing grow outside traditional centres. The expansion of suburban retailing is associated with suburbanisation of the population. Despite a shift in planning philosophy towards more compact city footprints, the weight of growth in and around suburbs is unlikely to change significantly in the foreseeable future. The decentralisation of retailing has also been associated with the growth of disposable incomes and consumerism generally, and the emergence of new models, new companies, and new brands to serve it rather than a simple relocation of retailers. Hence, relocation out of the city by individual stores has only been one element of decentralisation, and even then is likely to be accompanied by changes in their nature. Restrictive retail land use policies can be seen as simply one way governments in the past have chosen to intervene in the shopping experience. Others include controlling trading hours, prices, and the like. This can reflect resistance to the impact of new, often international, entrants on existing local firms. However, as globalisation through the freeing of trade and capital movements has become endemic, consumers’ expectations have changed, and labour markets have been liberalised, so such policies have generally been relaxed. Consequently, policies for regeneration of ageing centres have begun to focus on refurbishment, redevelopment, and diversification of town centres rather than restricting new forms of retailing elsewhere (if not more so).

Draft Hamilton Retail Review - Summary iii Predicting the Future of Retailing It is difficult to see how the sorts of step change described in this report could have been anticipated and accommodated in plans prepared twenty to thirty years ago. Similarly, it is difficult to anticipate the changes in consumer behaviour, retail technology, and industry structure that will most influence how increasing demand is translated into land use requirements over the next twenty to thirty years. Apart from agreeing on the disruptive impact of e-commerce industry commentators do not provide a consistent view of the future for retailing. There is agreement that a greater share of goods will be subject to electronic and mobile purchasing behaviour. Meeting consumers’ increasing expectations for convenience is a common thread among possible responses. However, there is less agreement on how this might be done. One way is for individual retailers to increase the velocity of sales by exploiting multi-channel retailing, continuing to offer large format stores for display and sales fulfilment. Strengthening the showroom concept behind bulky goods stores may be a strong imperative for incremental growth under these circumstances, especially when complemented by a strong fulfilment capacity. Another response is to enhance the in-store experience, focusing on service, brand promotion, and ambience. Related to this is the notion of integrating shopping into a wider leisure experience, whether in a refurbished and diverse town centre, a modern mall, or an individual store. One suggestion is that there will be a reduction in the scale of stores and moves towards more specialised store development. This would highlight service and responsiveness, the quality of the experience from a recreational as well as retail stand point, and perhaps focus more on local areas. Whatever role one or other of these directions plays in the future of retailing, it is likely that demands by consumers will be more exacting and diverse, and that individual stores will need to respond. However, the uncertainty over how retailing will evolve over the next twenty years or so does not point to a definitive land use strategy for the sector or for individual centres within it, but instead calls for real flexibility in land use, and a capacity to respond to the individual circumstances of centres as and when they undertake development planning. Principle Conclusions The review has developed conclusion in response to the key questions that emerged from the comparison of the Operative and Proposed District Plans and the shifts from the former to the latter. These are summarised below. Conclusion: Is promoting and preserving a hierarchy a useful retail planning method for Hamilton? Constructing and enforcing a retail hierarchy for retail planning in Hamilton is not supported by the evidence and seems unnecessarily limiting. The zoning of adequate new capacity in existing centres and planned growth areas remains the appropriate response to the prospect of retail growth generally. Any concerns over the detail of what might occupy that capacity and where it should go might best be managed simply through applying structure planning and (if necessary) plan change processes that reflect shifts in the role or circumstances of individual centres within a much more flexible zoning regime than proposed in the PDP. Conclusion: Does the growth of retailing in other centres harm the CBD?

Draft Hamilton Retail Review - Summary iv The relatively poor performance of the CBD may be self-correcting with a lift in investment since 2010. If it is having any effect, then, competition from outside the CBD may be promoting its recovery, or at least advancing the cyclical process of retail renewal. Experience elsewhere suggests that such renewal will lift the role of relatively small scale, high value, boutique, and specialty stores in the CBD. Conclusion: What effect might we expect from policies to limit retailing outside the CBD? The overall outcome could be less economic activity in the city, less efficient retailing, and higher costs to consumers. Any negative impact on employment and incomes resulting from policies limiting the scale and form of retailing outside the CBD potentially undermine its commercial and social functions because stymying growth elsewhere arbitrarily may reduce city-wide investment, income, and jobs. This in turn will reduce demand for the goods, services, and amenities found in the CBD. At best such policies will be ineffective, but they could also prove counterproductive. Conclusion: What planning is needed to promote the CBD? Non-regulatory initiatives might better promote the vitality and vibrancy of the CBD. Hamilton already has a self-funding Business Improvement District covering the CBD and operated by the Hamilton Business Association in association with the council. A correction to yields and the redevelopment Centre Place should also promote further private investment to parallel civic investment in public amenities and the quality of the public domain Effective transport planning, traffic management, and public transport to enhance accessibility and movement around the centre will contribute. Planning can contribute by providing for flexibility of use, alongside high standards for the built environment, and recognising the benefits of a compact CBD for such outcomes of walkability and attractive inner city living. Conclusion: How to plan for an uncertain retailing future? A planning policy which pre-empts diverse and changing retail practices, some of which cannot be easily anticipated, risks distorting, deferring, or deflecting development at a cost to the retail sector and the city’s residents. The review of retail performance and prospects in Hamilton suggests that increasing rather than reducing flexibility is likely to lead to better social and economic outcomes. In this respect, any shift away from the flexibility of the Operative District Plan and increased intervention in economic (rather than environmental) processes raises significant policy risks under the Proposed District Plan.

Draft Hamilton Retail Review - Summary v 1 Introduction

1.1 Objective This report has been prepared for Tainui Group Holdings Ltd (TGH) which has interests in several current and planned retail centres in Hamilton. TGH is seeking an analysis and review of the provisions in the Proposed Hamilton City District Plan (PDP) for commercial land use with particular reference to the centres-based strategy adopted to cater for future retail development. The report has been prepared with the aim of determining the appropriateness of the proposed policies in the light of the changing pattern of retailing in Hamilton, prospects for the growth of retail spending in the city, and the outlook for the future of the sector generally. In particular, it assembles evidence and analysis to address the following questions:  Is promoting and preserving a hierarchy a useful retail planning method for Hamilton?  Does the growth of retailing in other centres harm the growth of the CBD?  What effect might we expect from policies to limit retail investment outside the CBD?  What planning is needed to promote the CBD?  How best to plan for an uncertain retailing future?

1.2 Outline This report covers: 1. The treatment of retailing and commercial centres in the Proposed District Plan and how this has changed from the Operative District Plan (Section 2); 2. The evidence and analysis underlying the centres-based policies contained in the PDP and the Proposed Waikato Regional Policy Statement, and how they support the strategy of protecting the city centre from undue competition from the other major and suburban centres in Hamilton (Section 3); 3. Recent broad trends in population and indicators of retail activity and investment to establish how and where retailing has been developing in Hamilton and identify any relationship between the performance of central Hamilton and the other major centres (Section 4); 4. The outlook for retail expenditure in Hamilton and its implications for the expansion of retail capacity (Section 5); 5. The prognosis for and planning of city centres and city centre retailing generally based on its evolution in the recent past and the future changes anticipated by industry commentators in retailing that might influence land use and location requirements, and how these might best be reflected in planning for retailing and the CBD in Hamilton (Section 6 and Section 7).

Working Paper 2: The Ruakura Centre 6 2 Retailing and Centres in the Proposed Hamilton District Plan

This section introduces the objectives and policies that will influence future retailing and related land uses through the rules influencing where different forms of investment might take place (Section 2.1). It then compares the relatively prescriptive approach in the proposed with the more flexible approach in the operative district plan (Section 2.2), and examines the nature of the retail hierarchy promoted (Section 2.3). It addresses the distribution of 1and provided for retailing by level in the proposed hierarchy (Section 2.4), and the differentiation of provisions for suburban and neighbourhood centres (section 2.5). It is conclude that planning for retailing has become more prescriptive and less flexible in the PDP, and that the hierarchy on which it is based is arbitrary and inconsistent. The result is a series of detailed rules for uses which ultimately impinge on the scale of enterprise (through prescription of tenancy sizes), which are unlikely to provide for the sorts of changes that might occur in the sector, and may prove counter-productive through the intention to shape the hierarchy (and particularly promote the primacy of the CBD) by constraining investment options in retailing.

2.1 The Proposed Hamilton District Plan The principal objective shaping policies for retail and service activity deals jointly with the central city, business, and community activities by promoting a spatial hierarchy of commercial activity: 2.2.4 Establish a hierarchy of viable and vibrant business centres that provide a focus for retail, commercial and entertainment activities and serve the social, environmental and economic needs of the community. The policies through which this objective is to be pursued emphasise promotion of the central city as the preferred location for non-industrial business activity within a defined hierarchy of centres: 2.2.4a Business activity and development shall locate in the most appropriate centre for its role, according to the following hierarchy:

i. The Central City is the primary business centre, serving the City and wider region, and is the preferred location for significant office, commercial, retailing development and civic activities. ii. Chartwell and Te Rapa North complement the Central City, to serve large parts of the City and adjoining districts, and contain primarily retailing, entertainment and services. iii. Suburban centres, to provide convenience goods, community services, facilities and employment to serve immediate suburban catchments iv. Neighbourhood centres, to contain retailing and service activities to serve immediate residential catchments.

2.2.4b The distribution, type, scale and intensity of activities outside the Central City shall not undermine the viability, vitality and vibrancy of the Central City, its amenity values, or role in meeting the needs of the region. In effect, 2.2.4a defines where activities can go and policy 2.2.4b provides grounds for excluding activities from “lower tiers” of the hierarchy. These policies provide the grounds for the plan to prioritise where private and public investment should occur. By determining the activities that are permitted within an individual centre according to where it sits in the hierarchy, the plan

Working Paper 2: The Ruakura Centre 7 contemplates regulating competing and complementary relationships among them and their occupants to foster commerce in the central city. The explanation offered for this policy position is compliance with the Future Proof subregional development strategy and subsequently the Regional Policy Statement:

Explanation A hierarchy of business centres provides structure and context to the functioning of the urban area and its transport network. It provides a clear framework within which public and private investment can be prioritised and made, and provides a basis for regeneration and intensification initiatives.

The Regional Policy Statement calls for the Central City to be recognised and enhanced as the primary retail, economic, business and social centre of the Future Proof Area. It encourages the greatest diversity, scale and intensity of activities to encourage and provide for the vitality and amenity of the Central City. It is important to ensure that activities outside the Central City do not undermine the City’s core function.

The City Centre and immediate environs forms the Regional Centre of Hamilton and is the dominant retail, business and entertainment centre for the City and region and the focal point for the majority of the City’s workforce. Retailing activity is a significant component of activities that serve the City and wider region including commerce, government, education, health and medicine and entertainment.

City growth and demand projections indicate that the hierarchy of business centres can adequately cater for growth in the Central City, the Sub-Regional and Suburban Centres through a mix of new and more intensive redevelopment of centres. (Proposed District Plan, 11, 2-4) The promotion of hierarchy that might be shaped to promote the primacy of the city centre as a Regional Centre is expanded in Chapters 6 and 7 of the PDP in terms of five tiers: i. The central city, subject to a Central City Zone, and extended to include “its immediate environs”; ii. The Business 2 (events facilities) zone provides for “localised commercial activity supporting major visitor facilities” iii. Sub-regional centre zones at Te Rapa North and Chartwell, subject to Business 1, 3, and 4 zoning (defined as sub-regional fringe centre, sub-regional core, and large format retail zones respectively); iv. Suburban centres subject to Business 5 (suburban centre core zone) and Business 6 (suburban centre fringe zone); v. Neighbourhood centres zoned Business 7 (neighbourhood centre). (District Plan, 1, 6-2). The result is highly differentiated and prescriptive land use provisions emphasising that: “In each Business Zone the distribution of office and retail development outside the Central City Zone, is controlled to ensure that adverse effects on the Central City are avoided … The intention is to encourage the establishment of retail and office activities back to the central city. The retention, redevelopment and return of office activities to the central city is [sic] critically important to maintaining a sizeable daytime population to support retail and other activities.” The inference of the underlined wording is that growth outside the CBD has resulted from relocation of activities away from it, a process that the PDP seeks to reverse. This proposition is further examined in the current review.

Working Paper 2: The Ruakura Centre 8 A further aim is: “to consolidate people focused activities within cohesive and integrated business centres, supported by larger-format vehicle-based activities in the fringes of these centres. This is reflected in the subregional centres zoning and in particular Te Rapa North where a grouping of large format activities has established within and on the edge of The Base retail centre.” (PDP, 1, 6-2).

2.2 CBD Focused Business Policies The PDP aims to control where businesses might invest in order to protect and promote businesses in the central city, partly on the grounds that this might enhance the efficiency of movement within the city. In this it reflects the strategic direction for the built environment developed through Future Proof, the Waikato Regional Policy Statement, the Hamilton Urban Growth Strategy, Proposed Variation 21 to the Operative District Plan (withdrawn), and structure plan preparation. These broadly support a centres-based approach. While not uncommon in urban planning, the strategy is given particular weight in the PDP. The “overall aim” of objectives and policies across six of the seven business zones is to: “re-establish the primacy of the Hamilton Central City and define its relationship with the subregional centres and suburban centres” (Proposed District Plan, Volume 1, 6-1). The aim of limiting growth in areas where it is perceived as prejudicial to the development of the central city is reflected in the objectives and policies applied to the business zones. For example, policy 6.2.1 a provides for expansion of sub-regional centres that will “contribute to the development of a cohesive and integrated centre, commensurate with its role in serving an extensive catchment, whilst avoiding adverse effects on the functionality, vitality, and amenity of the central city” (6.2.1 A). Similarly, Policy 6.2.1 for the Chartwell and Te Rapa/Base subregional centres allows for development of “a diverse range of activities of a scale that will sustain the centres and complement but not undermine the primary role of the central city” (6.2.1 b). Similar provisos are incorporated into the policies for suburban centres, with their expansion “at a scale and nature [sic] appropriate to the needs of the surrounding residential areas, taking into account the need for any expansion to avoid adverse effects on the functionality, vitality and amenity values of the central city” (6.2.2 a). Rules are adopted to limit or qualify what can be done elsewhere as a means of protecting the CBD. For example, many of the restrictions in the Rules – Activity Status Table are qualified or defined according to the scale of an activity. Offices over 250 m² are discretionary, restricted discretionary, or non-complying in business zones 1 to 7. Retail premises between 150 m² and 399 m² are discretionary except in the core of suburban centres. Stores larger than that are permitted only in business zones 3 and 4, subregional, and large format centres. By imposing such ceilings the rules risk both impeding or penalising organic growth in situ and impeding new investment. The table of rules also specifies maximum gross retail floorspace of individual tenancies for suburban and neighbourhood centres (business 5, 6 and 7 zones, 1, 6-14). This raises questions over the likely effectiveness and impact of rules applied to protect the CBD that make implicit assumptions about current and future relationships between tenancy size and function, and among tenancy size, productivity, and turnover, and how these might change in the future.

Working Paper 2: The Ruakura Centre 9 By and large, the objectives and policies for the Central City Zone allow (and promote) a wide range of activities in the interests of “a diverse vibrant and sustainable metropolitan centre” (7.2.1, 1, 7-5). Industrial activities other than service industries are generally excluded as noncomplying or discretionary. Office, retail, and commercial activities (other than yard-based activities) are generally permitted although with some discretionary rules in the Ferrybank and Opoia precincts. Provisions also vary slightly across four precincts defined within the central City.

2.3 Proposed Changes in Business Zone Planning In order to assess the practical implications of a hierarchy-based policy framework for retailing, this section compares the provisions of the PDP with the Operative District Plan business zones (ODP, adopted in 2012).

2.3.1 The Operative District Plan The ODP takes a flexible approach to business planning, aimed at: “accommodating rapid change, minimising restraints on competition, and recognising and responding to differing environmental implications” (page 6.0-1). The ODP includes just four zones dealing with retail and commercial activity: 1. The City Centre as “a strong retail, administrative and entertainment hub for the city and wider Waikato Region”; 2. Suburban Centres that “provide for convenient local shopping close to residential communities”; 3. General Commercial Activities including provision for LFR; and 4. Drive-Through Services.

There are two general objectives for suburban centres and several dealing specifically with Rototuna. Of the two general objectives, 6.2.1 deals with uses in the suburban zone. It aims: To facilitate a wide range of suburban business opportunities throughout the city in association with residential neighbourhoods in an environmentally acceptable manner.

The associated policies focus on accessibility relative to the distribution of the population: a) Enable a wide range of commercial and related activities to be established within suburban centres. b) Facilitate the wide distribution of suburban centres throughout the city including the new growth areas, which enables convenient access to a wide range of goods and services, provided the adverse effects of any development on adjoining areas can be minimised. c) Ensure that the scale of suburban centres is compatible with the amenity values of the surrounding residential neighbourhood. d) Enable the expansion of existing suburban centres in established residential areas in circumstances where the scale and location of development would not impact significantly on the wider residential neighbourhood. e) Minimise the adverse effects associated with suburban centres on the traffic safety and efficiency of the city’s transport network.( 6.2-2)

The second objective deals with the amenity values associated with commercial centres and potential impacts on surrounding residential environments.

Working Paper 2: The Ruakura Centre 10 The rules in the plan allow for a wide range of activities subject to complying with broad design and site coverage requirements (Table 1). Table 1 Status of Commercial Activities, Operative District Plan

a) Permitted Activities b) Controlled Activities  Any Retail Activity  Apartment Buildings  Offices  Residential Centres  Health Care Services  Managed Care Facilities  Restaurants  Rest Homes  Licensed Premises  Visitor Accommodation  Community Centres

 Places of Assembly all with respect to; design and configuration of  Marae buildings, site layout, vehicular provision  Education and Training Facilities  Warehouses (except on Lot 1 DPS 32102  Drive-Through Services (in the Vehicle within area ‘B’ as shown on Appendix Service Area) - with respect to; site 4.2-I) layout, landscaping, vehicular provision  Accessory Buildings  Informal Recreation and Ancillary

Buildings c) Discretionary Activities  Relocated Buildings  Drive-Through Services  Parking Lots and Parking Buildings .  Any other residential activity

 Fire Stations

(ODP, pages 4.2-2, 3) The Operative District Plan does not appear to not contemplate limiting development elsewhere in order to promote the CBD.

2.3.2 The Proposed District Plan This broad approach is replaced in the PDP with a much more prescriptive approach through adoption of seven business zones and four different precincts within the City Centre Zone (giving ten zones altogether) and rules pertaining to each. Consequently the PDP is less flexible than the ODP. Consistent with a shift to prescribing rather than enabling it incorporates an open-ended prohibition on any expansion of Business Zones 3 (subregional centres) and 5 (suburban centres) that might compete with the city centre. Because the PDP is not explicit about what activities this covers and how it might deal with possible cumulative effects there is a real risk that this becomes a major source of conflict and costs in plan administration and as a result discourages investment. In addition, the General Standards prescribe maximum individual tenancy sizes on a Gross Floor Area (GFA) basis for suburban and neighbourhood centres, although these vary on a centre-by-centre basis. Neighbourhood centres are allowed one tenancy of between 200m2 and 400m2 GFA, with all others limited to less than 200m2. These provisions reflect an unrealistically deterministic view of how retailing might develop in the future, and one unstained by evidence or analysis. 1

1 It is interesting to note that 17% of tenancies at Chartwell exceed 200m2, 26% at Te Awa and (unsurprisingly) 72% at The Base.

Working Paper 2: The Ruakura Centre 11 A highly prescriptive approach may be prejudicial to the efficiency of retail investment in the city as a whole by imposing higher costs on investment for those businesses obliged to locate in the centre that would not otherwise do so; by increasing transaction and delay costs for significant retail investors or operators seeking to operate outside the centre; or simply by discouraging investment because of the risks of failing at achieve a consent to develop in a preferred location. The result is likely to be a lower level of growth than might otherwise be achieved. By undermining Hamilton’s growth potential in this way it follows that an over-prescriptive plan will impede growth in the city centre to the extent that the health of the CBD, as the city’s primary centre depends on the performance of Hamilton’s economy as a whole. More generally, the detailed approach the PDP abandons the flexibility that would allow for changing consumer behaviour, changes in the nature of retailing, and the uncertainty arising from constrained economic conditions that are better provided for through the flexibility in the ODP.

2.4 The Retail Hierarchy The PDP seeks to fix in place a retail hierarchy as a means of consolidating commerce and promoting the CBD. The idea of a hierarchy of centres has “hardened” progressively through the underlying documents, although without supporting technical evidence regarding the activities within each level and how these are changing (Section 3, below). The hierarchy as defined appears to be largely based on an the relative scale of centres and their reach in the regional or sub-regional catchment. The hierarchy adopted was summarised in the review of Future Proof business land (Table 2). This placed the CBD at the top, followed by two subregional centres, large format centres, “neighbourhood”, and “localised” centres (which correspond with the PDP “suburban” and “neighbourhood” centres). Property Economics (2011) identified as “main retail centres” Glenview, Nawton, Dinsdale, Hamilton East, Thomas Road, and Hillcrest. Table 2 The Current and Projected Hamilton Retail Hierarchy

Centres 2010 2041 CAU City Centre Hamilton CBD Hamilton CBD Hamilton Central The Base The Base Te Rapa Subregional Centres Chartwell Chartwell Chedsworth Large Format Centres Te Kowhai/Church Rd Te Rapa Te Kowhai/Church Rd Clarence St Tristram St Hamilton Central Hillcrest Riverlea Hillcrest Dinsdale Dinsdale South Neighbourhood Centres Dinsdale Ruakura Huntington Rototuna Hamilton East Hamilton East Glenview Glenview Glenview Localised Centres Nawton Nawton Nawton Note: CAU refers to the relevant Census Area Unit Source: Latitude Planning Services, October 2010, p11

The validity of the hierarchy as adopted for the PDP can be challenged on the basis of variability among centres within divisions below the level of the CBD. This can be demonstrated through

Working Paper 2: The Ruakura Centre 12 reference to data on floorspace at the Census Area unit (CAU) level collated by Quotable Value New Zealand (and supplied for calendar years by Property IQ). For this purpose we can have used two QVNZ categories, CR (retail) and CX (mixed commercial, including retail malls. 2 This reveals contrasts and inconsistencies in the notion of a fixed hierarchy. For example, between 2006 and 2012 the Thomas Rd centre (in Huntington CAU) emerged as a “new” neighbourhood centre (Figure 1). Te Rapa more than doubled its capacity while floorspace at Chartwell did not increase (Chedworth CAU including the Chartwell Mall and Chartwell neighbourhood centre). 3

Figure 1 The Distribution of Floorspace across the Retail Hierarchy, 2006 and 2012

Note: Based on Census Area Units. Te Rapa includes LFR. The other area of LFR – Tristram Ave – is included in the Central City CAU Source: Quotable Value New Zealand, Property IQ 2012

There also appear to be significant differences in total floor space and changes among suburban centres as identified in the PDP. For example, Hamilton East has apparently contracted, Hillcrest is stable, and Dinsdale expanding slightly. Dinsdale and Rototuna are around twice the size of Hillcrest, while Hamilton East is almost twice as large again. Designation of both The Base and Chartwell as subregional centres is even more anomalous. Based on industry figures, the Base and Te Awa mall have close to 150 tenants jointly leasing over 80,000 m2. Chartwell has around 115 tenancies occupying 30,000m2. According to number plate surveys cited by Property Economics (2011), The Base draws shoppers from a much larger catchment. The Base also has substantial room for expansion and is well served by major arterial roads, including its proximity to the new SH1 by-pass. Yet, despite these physical and functional differences, the PDP treats these two as equivalent centres for the purpose of applying land use rules.

2 These categories are discussed further on page 56, below. 3 Te Rapa CAU is dominated by The Base and, in 2012, Te Awa. However, the CAU figures include significant areas of localised LFR and ancillary retailing in industrial areas.

Working Paper 2: The Ruakura Centre 13 While there are connections between location, accessibility, development potential, and prospects, changing circumstances enable – and require – centres to change in distinctive ways. Allowing shifts in the relative size and status of centres (subject to satisfactory environmental outcomes) is likely to be more efficient than trying to maintain structures founded on past circumstance. By contrast, constraints on investment will forestall the productivity gains available through new investment and maintain quasi-monopoly rents by unduly protecting past investment in the city centre.

2.5 The Distribution of Business Land The QV data described above is based on actual floorspace. The focus of this section is on the land available to current and future retailing in the business zones of the ODP and PDP. The relevant data has been compiled and mapped for comparative purposes by Boffa Miskell (Figure 2). This information can be used to explore the spatial consequences of the planning rules under both the operative and the proposed plans. The maps highlight the past development of Te Rapa, the extension of the CBD, and the proliferation of zones in the PDP, including the distinction between suburban and neighbourhood centres. Under the PDP the city centre zoning is extended to take in most of what was previously the commercial service zone, to increase from an estimated 23.9 to an estimated 91.9ha, with an adjoining commercial fringe of 23.1ha extending it to the southwest and east where it merges with and extends south of the Business 5 Suburban Central Core Zone (Table 3). Other changes include the movement of a number of small centres from suburban to neighbourhood zoning. Others have been shifted to central city commercial fringe or suburban centre fringes. Omitting the planned centres for growth cells, this reduces the existing suburban centres area from nearly 48ha to 34ha, implying a commitment to both dispersal (neighbourhood centres and new growth cell centres) and consolidation (subregional, fringe and central city zonings). Table 3 Business Zone Areas in the Operative and Proposed District Plans (Hectares)

Operative Proposed City Centre 23.9 Central City 91.9 Commercial Service 149.8 1 Commercial Fringe 23.2 Suburban Centre 47.7 2 Events Facilities 6.7 Total 221.4 3 Subregional Centre 21.4 4 Large Format Retail 44.8 5 Suburban Centre Core 53.9 Rototuna 9.5 Rotokauri 7.1 Peacocke 3.2 Balance 34.1 6 Suburban Centre Fringe 3.0 7 Neighbourhood Centre 22.0 Total 266.9 Source: Compiled by Boffa Miskell, Auckland The following discussion considers the relative land areas of centres allocated to the suburban and neighbourhood categories in the PDP based on the mapping of centres in Figure 2.

Working Paper 2: The Ruakura Centre 14

Figure 2 Business Zones in the Operative and Proposed District Plans

Source: Compiled by Boffa Miskell, Auckland

Working Paper 2: The Ruakura Centre 15 2.6 The Centres Some 63 discrete neighbourhood and 13 suburban centres were identified.4 For some suburban centres adjoining parcels of Business 5 (suburban centre) and Business 6 (suburban fringe) land were combined, and in two cases proximate neighbourhood centre land was included. Ranking and plotting centres by the amount of land zoned (Figure 3) raises a number of questions about the use of a hierarchy as a planning method for retailing. First, beyond the CBD and The Base there are no obvious breaks in scale or thresholds established that might be associated with a fixed hierarchy. The size distribution across suburban and neighbourhood centres is continuous, although there is an apparent break in scale between the larger new centres proposed for the northern suburbs and the rest. Similarly, the differentiation among smaller suburban centres and larger neighbourhood centres is arbitrary. The Hillcrest Cambridge Rd centre, for example, is smaller than the ten largest neighbourhood centres.

2.6.1 Suburban Centres Thirteen suburban centres were identified from the PDP, with an estimated collective land area of over 53ha, and a median size of 3.2 ha (Table 4). They are skewed towards the large centres of the northern suburbs, with three intermediate centres in the central area, and smaller ones in the south. Chartwell suburban centre is located close to Chartwell subregional centre and presumably operates effectively in association with it, so its treatment as a suburban centre may also be inappropriate. Table 4 Suburban Centres, Proposed District Plan

4 This exercise was undertaken by Boffa Miskell, Auckland, drawing on planning maps and additional information provided by Hamilton City Council.

Working Paper 2: The Ruakura Centre 16 Figure 3 The Size Distribution of Zoned Suburban and Neighbourhood Centres

Working Paper 2: The Ruakura Centre 17 2.6.2 Neighbourhood Centres The mapping exercise identified some 63 neighbourhood centres within Hamilton City covering 22ha. They range from just under 460m2 zoned area to 13,200 (1.32ha). The average size is around 3,400m2, but the median just 1,700m2, again denoting considerable variability and the presence of a small number of large centres. Neighbourhood centres are widely dispersed, although are clearly more prevalent in the older suburbs through the centre (north of the central city) and to the west of the city (Figure 4). There are fewer evident in the new suburbs to the northeast and there is little apparent provision for them in the growth cells. The implication is that there is a shift underway from reliance on local stores to increased reliance on integrated suburban centres.

Figure 4 Distribution of Suburban and Neighbourhood Centres

2.6.3 Conclusion – How Helpful is the Retail Hierarchy? Given the absence of a clear points of differentiation between the categories adopted and the allocation of centres among them, imposing a hierarchy is inevitably arbitrary and contestable. More importantly, adopting such arbitrary divisions as a basis for setting land use and occupancy rules is likely to reduce the capacity of the network of centres within Hamilton to adapt to changes in the market environment. These changes will be driven by shifts in the structure of retailing, changing

Hamilton Retail Review 18 population characteristics, and evolving patterns of consumption. Providing for more rather than less flexibility in the supply of land for retail activity is likely to be a more appropriate planning stance, with generic land use controls around the effects of continuing development at any one centre rather than on where it is deemed to sit relative to other centres in the city at a particular point in time. Basing a hierarchy city primarily on retail functions – defined by selling activities, scale of premises and scale of tenancies – is also a weak basis for predicting, let alone prescribing the long-term character – and opportunities – of any given centre or locality. 5 Fixing retail opportunities within hierarchical categories and consigning centres permanently (or at least over 20 to 30 years) to one level or another is a planning approach that fails to reflect the impact of possible wide-spread structural shifts in economic conditions and changes in local circumstances that will together shape future retail activity. If a hierarchy is to be adopted as a general guide to future land use and planning provisions it may best aim to respond to the capacity of individual centres to change in the future. For example, it could distinguish between the CBD, Te Rapa6, and:

 Highly localised centres serving largely neighbourhood shopping (which might include stand-alone stores) and small-scale food services with little if any capacity to expand their current footprint, although with considerable potential to change activities and format;  Suburban centres serving a number of nearby neighbourhoods with the majority of access by motorised transport. They may incorporate integrated shopping malls, supermarkets and services such as dry cleaning and hairdressing and, for some patrons, neighbourhood centre functions also. Such centres would have the capacity for significant change over time by either expansion or redevelopment, including the possibility of shifting towards more service activities.  Sub-regional centres serving more than a local suburban catchment and, as a result of specialisation, potentially a city wide catchment for some goods or services. They may accommodate malls, large format retailing, hospitality, and services (banks, civic activities, professional services, gymnasia, personal, and health care, medical facilities and the like). At the moment, Chartwell is the only example in Hamilton, with Rototuna likely to join the ranks.

It should be recognised that changes that do take place will not simply be by way of physical growth or intensification, but are likely to see increasing diversity of activities within centres, including the introduction of new retail categories and new services. The aim of any classification of centres would be to ensure that the increasingly diverse needs of an expanding city can be catered for in an orderly manner, not to determine what should go where by “order” of centre.

2.7 Differentiating Suburban and Neighbourhood Centre Activities The arbitrary nature of the hierarchical allocation of centres within the PDP is evident in the following comparison of the provisions for suburban and neighbourhood centres based on The Rules – Activity Status Table (PDP, Volume 1, 6-8).

5 The parallel at a wider level of spatial resolution might be to determine that all cities within a certain size band should contain the same functions, and not move away from them 6 Grouping Chartwell and Te Rapa into a single category is not a reflection of their respective rules and capacity to develop, with Te Rapa, like the city centre, better treated as a major regional retail destination.

Hamilton Retail Review 19 The comparison covers rules under three zones: Business 5 (suburban centre core), Business 6 (suburban centre fringe), and Business 7 (neighbourhood centre). Only the status of uses for which rules vary across these zones is described. Floor areas refer to GFA. The differences are as follows:

 Light Industry is discretionary in (Business Zones) 5 and 6, non-complying in (Business Zone) 7;  Goods transport depots are discretionary in 5, restricted discretionary in 6, non-complying in 7;  Emergency service facilities are discretionary in 5 and 6, but non-complying in 7;  Offices under 250m2 are permitted in 5 and 6, but discretionary in 7;  Offices of 350-500m2 are discretionary in 5, but non-complying in 6 and 7;  Retail (premises) of 150-399m2 are permitted in 5, but discretionary in 6 and 7  Retail floor space over 1,000m2 discretionary in 6, but non-complying in 7  Banks over 200m2 are permitted in 5, but non-complying in 6 and 7  Yard-based retail under 400m2 is permitted in 6, but discretionary in 5 and 7  Yard-based retail over 400m2 permitted in 6, but non-complying in 5 and 7  Building improvement centres under 400m2 are permitted in 6, non-complying in 5 and 7  Building improvement centres over 400m2 are discretionary in 6, non-complying in 5 and 7  Licensed premises under 200m2 are permitted under 5, discretionary in 6 and 7;  Restaurants and cafes under 200m2 are permitted under 5, discretionary under 6 and 7;  Restaurants and cafes 200m2 or more are permitted in 5but non-complying in 6 and 7  Commercial places of assembly (land or buildings used principally for the public or private assembly of persons for cultural, entertainment, recreation, leisure, education or similar purposes) are permitted in 5 and 6 but non-complying in 7 (cinemas and bowling alleys which are non- complying in both);  Drive-through services (excluding fuel retailing) are restricted discretionary in 5 and 6, but non- complying in Business 7;  Drive-through fuel retailing is restricted discretionary in 6 but non-complying in 5 and 7;  Parking lots and buildings are discretionary in 5, permitted in 6, and non-complying in 7;  Health-care services of 250-1,000m2 are permitted in 6 but restricted discretionary in 5 and 7;  Tertiary training facilities over 250m2 are discretionary in 5 and 6 and non-complying in 7  Detached and duplex dwellings are non-complying in 5 but discretionary in 6 and 7;  Visitor Accommodation is discretionary in 5 and 6 but non complying in Business 7

The collective effect of these rules is to largely exclude a wide range of non-retail consumer and household-oriented services and facilities from neighbourhood centres, as well as constraining the scale of any activities, including retailing, that might be permitted as of right or under discretion. In effect, neighbourhood centres are limited in their capacity to adapt to changes in the retail or service environment. One example of such adaptation has been the development of neighbourhood

Hamilton Retail Review 20 cafes and restaurants as a result of the vacating of shops, or the introduction of local medical centres. Both would be difficult to achieve under these rules.

2.8 Conclusions Conclusion: Retailing in the Proposed District Plan Planning for retailing has become more prescriptive and less flexible in the Proposed District Plan. The hierarchy on which it is based is arbitrary and unlikely to be helpful for determining land use activities that may respond effectively to changes in local final demand for goods and services. The use of a series of detailed rules which impinge on the scale of enterprise (through prescription of tenancy sizes) according to where a centre sits in the prescribed hierarchy are unlikely to provide for the sorts of change that might occur in the sector, and may prove counter-productive through the need to sustain the hierarchy (and particularly promote the primacy of the CBD) by imposing arbitrary limits on investment and enterprise.

Hamilton Retail Review 21 3 The Rationale for Planning a Retail Hierarchy

This section examines the analysis and evidence brought to bear to justify the shift from the more general commercial zone approach adopted in the ODP. It considers the “trail” of policy documents that have been used to inform and justify the use of a hierarchy as a basis for developing rules pertaining to retailing in centres. It concludes that while the underlying technical analyses identified a network of centres and the dominance of the CBD, they do not justify cementing the hierarchy as defined in place through planning rules, nor promoting the CBD by limiting the development of other centres. Rather, the technical studies simply conclude that the capacity in existing centres, the provisions made for new centres in suburban growth cells, and the potential for gains in floorspace productivity are more than adequate to cater for foreseeable retail capacity growth. It appears that the idea of a hierarchy (rather than a network of centres) gained credence during later documents in the sequence, documents which dealt with principles rather than the evidence, and which fail to establish any direct causality between the performance of one centre (or level of the hierarchy) and the performance of another that cannot be attributed to external drivers (e.g., changes in the nature of retailing, the growth of the city, and the distribution of the population).

3.1 The Policy Trail The PDP Section 32 analysis couches the adoption of a business centres hierarchy in terms of: “maintaining and reinforcing the vibrancy and vitality of existing centres, consolidating urban development and identifying areas where intensification for residential and commercial activities while achieving wider public and private benefits, promoting efficient use and maintenance of infrastructure, and enhancing accessibility and passenger transfer opportunities to and between centres” (S32 report, 6-1). The question this section addresses is where in the trail of documents preceding the PDP this policy arises (Figure 5) and, in particular, what empirical or theoretical analysis justifies it. The principal empirical evidence that might be expected to establish a causal link between the existence and structure of a hierarchy of retail centres, and in support of policies to cement it in place, is the Waikato Regional Retail Study prepared in 2008-09 (Speer and Starr, 2009). This was a technical report prepared to support Future Proof, a collaborative non-statutory planning strategy prepared by Waipa and Waikato Districts, Hamilton City, and Environment Waikato. Future Proof was intended to align the resource management policies among the participating councils and to justify a policy of integrated planning for the built environment in the subsequent Proposed Waikato Regional Policy Statement. The Hamilton PDP seeks to implement this proposed regional policy in Hamilton City. The rest of this section describes the grounds for and policies enunciated in these documents that might be expected to influence planning for retail land uses in the Proposed Hamilton City District Plan. Summary conclusions for each document reviewed are boxed at the end of the respective sections.

Hamilton Retail Review 22 Figure 5 The Retail Policy Trail: Analysis, Strategy and Policy Documents

3.2 The Waikato Regional Retail Strategy The Waikato Regional Retail Study (WRRS) was completed in March 2009. With respect to Hamilton City it described the existing retail network as comprising:

 three major centres (CBD, The Base/Te Rapa, and Chartwell);  twelve suburban centres; and  15 neighbourhood centres (“corner shops”) The CBD core, fringe, and centres dominated, with an estimated 178,000m2 retail floorspace. This compared with 76,000m2 in Te Rapa, including The Base, 27,000m2 at Chartwell, and 100,000m2 in suburban and neighbourhood centres. Customer surveys indicated the city’s important regional retail function. According to this, 54% of CBD customers came from outside Hamilton City, and 40% of The Base customers. The authors summarised the state of the three main centres as follows: The CBD Overall, the above features characterise the importance of the CBD that is still the dominant retail, business, and entertainment centre for the City and Region. The CBD retail base contains about twice the amount of m2/GFA as found anywhere else around the City. However, while retailing is an important component to the CBD comprising around 28% of all business activities, 72% of CBD businesses are nonretail activities spanning a very wide range from commerce to government to education to health/medicine to entertainment. Hence, it is not surprising to find the CBD being the

Hamilton Retail Review 23 single largest employment zone in the City, with the workforce drawn from not only the City but across the Region. Office floorspace demand is generally high/vacancies are low, and a new office tower is under construction that will add almost +10% to the total existing office floorspace inventory. “Recycling” of retail floorspace (changes in shop tenancies) is a common feature of any retail centre, and in the CBD over the past three years some significant changes in larger retail spaces has resulted in strong replacement businesses filling vacated spaces, complimented by a low shop-space vacancy rate. (Section 1A(i)). The CBD is characterised as the dominant employment centre with diverse uses, drawing employees across a range of industries from across the city and beyond. It had an apparently active if not dynamic retail sector, marked by changing tenancies and low vacancies at the time. Te Rapa, including the Base: Overall, the Te Rapa area has to be considered a very strategic location for retailing activities. Substantial opportunity for future expansion still remains within zoned land. The area’s general location at/near a major “cross-roads” provides relatively easy access to a large customer catchment, particularly across the northern half of the City and also northern rural areas. And there are strong expectations for a major share of new population growth around the city to occur nearby, plus growth in surrounding rural districts. These features imply ongoing support to retailing in and around the Te Rapa area (Section 1A(ii)). Te Rapa was seen as well-placed for the continuing development of retail activity in particular, given its location relative to the distribution of growing demand and its capacity for accommodating growth. Chartwell Overall, Chartwell Centre, particularly the Mall, holds a unique position in the wider city retail hierarchy. It is far more than a local suburban centre; its specialty shop offer particularly in clothing – shoes – fashion accessories is second in size only to the City Centre. Recent expansion to the Mall was completed during 2007, and further expansion is proposed. Thus, the wide customer catchment supporting this centre is understandable, both today and looking forward to the future (Section 1A(iii)).

There is a clear distinction made among the respective retail roles of these three centres. The CBD was dominant in terms of retail floorspace, but retailing was by no means the dominant activity within the CBD. Te Rapa was seen as playing an important and expanding role in retailing. Chartwell was seen to have an advantage as a specialty mall attracting customers from a city-wide catchment. With respect to suburban centres, the authors concluded that future growth in the City fringe “in new growth cells like Rototuna (northeast), Rotokauri (northwest), Peacocke (southwest), and perhaps Ruakura (east) can be expected to require provision for additional retailing in the form and scale of local suburban centres”. The authors related potential future growth to existing and planned capacity, concluding that there is no immediate need for additional capacity in new centres outside these planned growth cells: The key result from the demand modelling work vs. the investigations into potential development capacities around the Study Area is that, to a very large degree, most future demand (at least over the next 20 years) can be met from existing commercial centres or known/planned projects. In planning terms, we believe this means that a strong emphasis on retaining a development focus around existing centres can be maintained and, other than for identified needs to provide new

Hamilton Retail Review 24 community or suburban-scale shopping in new growth areas, there is no need to provide for any major new retail area. Additional regional retail floorspace requirements for the Future Proof subregion were projected to be around 240,000m2 over 20 years (the “medium” projection developed by the authors and favoured by them for planning purposes), a 50% increase (p18), with around 204,000m2 estimated to be already available through existing shopping centres, of which 163,000m2 was in Hamilton City. Existing and planned capacity would meet around 85% of projected demand growth with no gain in sales per square metre. Any gains in “floorspace productivity” would, however, reduce projected demand for new capacity. This, together with uncertainty over economic prospects and consumer demand led to the conclusion that there is no need for any decisions regarding introducing new capacity. This, in turn, led to a straightforward “centres-based” strategy for Hamilton to:

 Maintain an emphasis on existing centres without any need to plan for any major retail centre anywhere around the City, and  Provide for new capacity by way of suburban or neighbourhood centres at Rototuna, Rotokauri, Peacocke, and Ruakura (para. 70(i)).

Conclusion: the Waikato Regional Retail Study The conclusions of the Waikato Regional Retail Study do not suggest that what occurs at one level of a retail hierarchy is going to influence what happens at another. There is no suggestion that the primacy of the CBD is under challenge from the growth of other centres. The report simply indicates that existing and planned centres at that time had the capacity to deal with foreseeable growth in retail demand, with the inference from the description of the three main centres that there are clear differences in their functions and the drivers of the growth that will shape their individual responses.

3.3 Future Proof Growth Strategy and Implementation Plan, 2009 Future Proof was a non-statutory sub-regional development strategy prepared by Environment Waikato, Hamilton City and Waikato and Waipa Districts to inform and align their policies and plans. Among the key features of the strategy was the statement that: Hamilton will be a vibrant and lively place that people want to live, work and play in and will expand its position as the centre of New Zealand’s fourth largest urban area. At its heart it will have a vibrant and diverse mix of uses (p.10). This translated into a commitment to increasing residential activity in Hamilton’s “CityHeart” (p.17), which underlies the principle that the “Metropolitan Hamilton CityHeart” should be maintained as: the vibrant retail, business, arts, and social ‘heart’ of the sub-region with it becoming the primary residential intensification area” (p.20). This in turn leads to a “guiding principle” “that ensures “commercial and industrial development is located in selected sub-regional areas and that it is not located where it undermines the influence of the Hamilton CityHeart … “(.p20). While the Strategy was informed by the Waikato Regional Retail Strategy, it moved from an implicitly passive approach based on retailing taking up available capacity to a more prescriptive approach intended to promote differences among existing centres and particularly to protect the city centre:

Hamilton Retail Review 25  Maintain an emphasis on the Hamilton CityHeart as the primary commercial centre for the Future Proof sub-region;  Recognise the role of both The Base and Chartwell; as major commercial nodes.  Provide for new retailing in new growth cells through local town centre/suburban centres/neighbourhood centres as appropriate e.g. ion Rototuna, Rotokauri, Peacocke, Ruakura. In setting the CBD apart, Future proof conflated The Base and Chartwell, centres which the retail study demonstrated were substantially different from each other in scale, catchment, and function. Future Proof did reaffirm, however, that there is no need “in the short to medium term to plan for any major new retail centre anywhere around the city beyond the provision of new growth cells” (p64). Future Proof deals with business land generally in Chapter 8. It makes a link between presumably declining growth in commercial and industrial land use in the city centre and development elsewhere, including the development of retailing outside the central city: Commercial and industrial development [is] undermining the Hamilton CityHeart on the outskirts of Hamilton, including the extensive development of retail/mall shopping and out of centre locations” (p120). Section 8, dealing with the city centre, elaborates on this, suggesting (among other things) that:  extensive development of retail/more shopping can undermine the historic retail strengths of the city centre  …  Large scale, devolved retail development can undermine the viability of the CBD, neighbourhood centres, towns and villages. No evidence is presented to demonstrate or verify the presumed cause and effect behind the claim that increased investment outside the centre reduces investment inside it. In fact, changing patterns of investment reflect many factors contributing to both changes in the CBD and suburban investment - suburbanisation, the distribution of new infrastructure (including roads), an ageing built environment, the growth and decline of various economic sectors, changes in production and distribution technology, changing architectural and urban design practices and environmental standards. The decentralisation of retailing will be influenced by a number of these non-spatial drivers of where investment occurs. These include changes in retail technology (e.g., large stores to exploit efficiency gains in the distribution chain) and structure (consolidation of ownership, proliferation of chains); shifting consumer preferences (e.g., increasing consumption of discretionary goods) behaviour (e.g., multi-purpose and multi-purchase trips); and evolving city form (by way of suburban residential development, wider dispersal of entertainment and recreation opportunities and improved transport.

Conclusion: Future Proof Despite the absence of additional information or evidence of cause and effect, Future Proof makes a commitment to reinforcing the primacy of the CBD in part by limiting retail growth elsewhere. Adopting this position as a starting point leads to statements of principle rather than evidence to justify limiting retailing in other centres should it be deemed to compete with the CBD. However, the possibility that changing relativities among centres may be no more than the spatial outcome of more fundamental drivers of change is not considered and consequently the practicality of the strategy, the probability of it succeeding, and its costs are not addressed.

Hamilton Retail Review 26 3.4 Proposed Waikato Regional Policy Statement, 2010 Objective 3-11 of the Proposed Waikato Regional Policy Statement (PRPS) establishes the grounds for the PRPS to take a lead in strategy and policy pertaining to the built environment: Development of the built environment (including transport and other infrastructure) and associated land use occurs in an integrated, sustainable and planned manner which provides for positive environmental, social, cultural and economic outcomes, including by: … b) integrating land use and infrastructure planning; c) recognising the value and long-term benefits of regionally significant infrastructure and protecting regionally significant transport and energy corridors; … (PWRPS, 3-7) Of particular significance to retail and commercial planning is Policy 6.1, Planned and Coordinated Development which aims to ensure that: Development of the built environment, including transport and other infrastructure, occurs in a planned and coordinated manner which: a) is guided by the principles in section 6A [reproduced below]; b) recognises and addresses potential cumulative effects of development; and c) is based on sufficient information to allow assessment of the potential long-term effects of development. and Policy 6.15 covering commercial development: Management of the built environment in the Future Proof area shall provide for varying levels of commercial activity to meet the wider community’s social and economic needs, primarily through the encouragement and consolidation of such activities in existing centres of commercial activity, and predominantly in those centres identified in Table 6.3 (section 6C). Commercial activities are to be managed to a) support and sustain the vitality, viability and self-sufficiency of existing commercial centres identified in Table 6.3 (section 6C); b) support and sustain existing physical resources, and ensure the continuing ability to make efficient use of, and undertake long-term planning and management for the transport network, and other public and private infrastructure resources including community facilities; c) recognise and enhance the Hamilton Central Business District as the primary retail, economic, business and social centre of the Future Proof area, by: (i) encouraging the greatest diversity, scale and intensity of activities in the Hamilton Central Business District; and (ii) avoiding or managing adverse effects on the Central Business District, including from activities which may adversely affect function, vitality or amenity of the Central Business District; d) ensure commercial development is not located on land specifically provided for industrial activities unless it is ancillary to those industrial activities; e) ensure new centres of commercial activity are only developed where they are consistent with a) to d) of this policy and avoid adverse effects, both individually and cumulatively on:

Hamilton Retail Review 27 i) the distribution, function and infrastructure associated with those centres identified in Table 6.3 (section 6C); ii) people and communities who rely on those centres identified in Table 6.3 (section 6C) for their social and economic wellbeing, and require ease of access to such centres by a variety of transport modes; iii) the safety and function of the arterial road network; and iv) the extent and character of industrial land and associated physical resources, including through the avoidance of reverse sensitivity effects.

Extracts from 6A Development Principles relating to the built environment in Hamilton General development principles New development should: a) support existing urban areas and development nodes in preference to creating new ones, and occur in a manner that provides clear delineation between urban areas and rural areas; b) make use of opportunities for urban intensification and redevelopment to minimise the need for urban development in greenfield areas; c) not compromise the safe, efficient and effective operation and use of existing infrastructure, including transport infrastructure, and should allow for future infrastructure needs, including maintenance and upgrading, where these can be anticipated; d) connect well with existing development; … f) minimise energy and carbon use such as by compact urban form, and design and location which minimises the need for private motor vehicle use, encourage walking, cycling and use of public transport and maximise opportunities for people to live, work and play within their local area; g) maintain or enhance landscape values and provide for the protection of historic and cultural heritage from inappropriate subdivision, use and development … j) avoid as far as practicable adverse effects on natural hydrological characteristics and proces0ses (including aquifer recharge and flooding patterns), soil stability, water quality and aquatic ecosystems, including through low impact design methods where appropriate; k) adopt, where appropriate, sustainable design technologies such as the incorporation of energy-efficient (including passive solar) design, low-energy street lighting, rain gardens, renewable energy technologies, rainwater harvesting and grey water recycling techniques; l) not result in incompatible adjacent land uses, such as with respect to industry, rural activities and existing or planned infrastructure; m) be appropriate with respect to expected effects of climate change and be designed to allow adaptation to these changes; … p) encourage waste minimisation and efficient use of resources (such as through resource-efficient design and construction methods); and Source: Proposed Waikato Regional Policy Statement

Hamilton Retail Review 28 While supporting initiatives to increase the diversity and density of CBD activity and providing for the management of activities there that might be detrimental to its development, the policy does not propose limiting activity elsewhere as a means of achieving these ends. Indeed, none of the policies draw such a distinction. The PRPS requires that the District Plans of constituent councils, including Hamilton, should manage new commercial activity in accordance with this policy. (pages 6-20, 6-21) At a region-wide level it promotes development that supports the intensification of uses in areas already developed, well- connected, and with sound infrastructure in place. It does not differentiate these principles or their application on grounds of their position in the hierarchy of centres it identifies (Table 6.3). Nor does it suggest different development principles for the CBD compared with other centres.

Conclusion: Proposed Waikato Regional Policy Statement The Proposed Waikato Regional Policy Statement emphasises consolidation around existing centres as part of a more general strategy aimed at urban containment. It also promotes the central city as an important regional asset, supporting policies to increase its diversity and protect it from activities potentially detrimental to its development. It does not, however, indicate that this should be done by limiting development at other centres, something which appears in any case inconsistent with the RPS emphasis on integrated planning and making best use of existing infrastructure.

3.5 Technical Background Document Hamilton Urban Growth Study The Hamilton Urban Growth Strategy (HUGS, Section 3.7, below) is a key input document into the District Plan review. It was based on a combination of technical analysis and consultation. The Technical Background Document published in September 2008 comprises the main analytical input. It was prepared to “integrate and bring a citywide approach to planning” in a spatial planning exercise designed to inform the “big picture” and prioritise growth among the many cells identified by the Council to cater for it (Executive Summary). The HUGS technical report focuses on Rototuna as the major residential growth cell initially (on the north-eastern edge of the City), Peacocke (south), and Rotokauri (northwest) as priorities for residential development, accompanied by on-going infill and intensification. Rotokauri and Ruakura are earmarked as centres of employment expansion. The report analyses the poor performance of the CBD (pp. 24-27), attributing it to:

 Lack of financial benefit of locating there;  Consequently low rentals that that do not support significant rebuilding, repair, or refurbishment of existing buildings;  Falling pedestrian counts;  “Lack of activity, energy and vitality to energise all the existing and possible future retail frontages and lane ways”. Other than the first point, these are symptoms of a slowdown in the centre rather than causes. Consequently, proposed policy responses focus on issues of form (design, land use allocation) rather than function (structural changes and changes in the market place). They do not envisage curtailing activity elsewhere as a means of boosting profitability in the CBD.

Hamilton Retail Review 29 One response called for is the relocation of big box retail and car yards, so that the sites these activities currently occupy in and around the CBD can be redeveloped for “affordable, designer office buildings” supporting “active retail frontages”. Other responses proposed to address the “failings” of the CBD included:

 Building a “non-financial” business case for businesses to locate in the CBD (presumably by creating an environment which lifts the utility of the centre to the extent that business are prepared to carry the higher costs of operating there);  Bringing new sites into play for affordable offices and parking around the CBD;  Improving CBD car parking;  Introducing personal services to the upper floors of existing buildings;  Relocating activities that attract antisocial behaviour (presumably out of the CBD);  Supporting nightclubs and music venues;  Developing a fashion and designer goods focus;  Developing cultural and entertainment activities within walking distance of the retail heart;  Providing specific attractions for young people within walking distance of the retail heart;  Attracting more tourists and day stay visitors and encourage them to stay longer;  Providing recreational activities to encourage residents, visitors and tourists to stay longer;  Increasing the number of local residents within “convenient walking distance of the CBD;  Providing specific visitor attractions particularly for young people within walking distance of the retail heart; and  Providing “creative, business, professional and personal development attractions and opportunities within walking distance of the retail heart”. In summary, proposals to promote the CBD focus on better utilisation of existing space and increasing the diversity and “quality” of activities in an area “within walking distance of the retail heart”. The emphasis is on attracting people to spend time there rather than on limiting growth elsewhere. . The proposals do not necessarily point to intensifying office activity or promoting retailing other than specialty designer and fashion goods shops. They do not obviously promote physical expansion. Indeed, emphasis on facilities within walking distance of the existing “retail core” suggests a commitment to a more compact CBD supported by residential intensification in the surrounding areas. The technical report acknowledges the three major retail areas (CBD, Te Rapa and Chartwell) and the need for emerging commercial areas and new centres associated with greenfield growth (p.58). It also suggests a number of related priorities including:

 Maintaining a rich variety of employment opportunities – particularly non-service and non-retail ones – within centres as well is providing for more residential growth;  Providing for intensification in a manner that will enhance dominance, competitive advantage and self-sufficiency of activity centres;  Ensuring that the quality public realm is a focus of all development and not simply the provision of services and activities;  Retaining character and identity of established late activity centres in the face of potentially significant intensification and change to the built environment.

Hamilton Retail Review 30 It promotes as a key aim of the growth strategy encouraging “economic prosperity, a mix of uses, and active public realm and greater land-use intensities”. The focus, then, is on consolidation and intensifying existing centres generally, not on promoting one, the CBD, at the expense of others. However, another aim does imply, albeit without evidence, that a decline in the CBD vitality may be attributable to the movement of activities to other sites. “revitalising the city heart as the pre-eminent activity centre of the region providing a major commercial and retail function. Efforts need to be directed towards attracting activity back into the CBD to increase its competitive position which has recently declined.” (Pp.58). This suggestion that to attract activity back is not supported by any analysis of how much city heart vitality is reduced by relocation of activity. Again, to reverses causality insofar as a more competitive CBD may attract investment. It is also inconsistent with the view clearly espoused throughout the document that the attractiveness of the CBD needs to be lifted first to encourage investment there.

Conclusion: Technical Background, Hamilton Urban Growth Strategy The HUGS Technical Document stresses the need to address the quality of the CBD setting and the need to build its appeal for investment as the basis for any policy. The promotion of a “clear network hierarchy” is based primarily on treating the CBD as the cultural, visitor, and entertainment heart of the city. The Urban Growth Strategy acknowledges the need to consolidate and upgrade its retail role, but does not promote it ahead of the other centres. Rather, it envisages that the CBD would serve “the southern half of Hamilton city”, and Te Rapa and The Base the northern half (p.60).

3.6 Variation 21 to District Plan, September 2009 Variation 21 to the Hamilton District Plan was intended to enhance the attraction of the CBD, promoting the central city as the primary centre for business activity, retailing, and entertainment. As a response to the vision and strategy of Future Proof and the proposed Hamilton Urban Growth Strategy (HUGS) it went further than those documents, however, in promoting the restriction of activities elsewhere to achieve this vision. The Variation was informed by a report on the role of the Hamilton CBD with particular reference to the retail component prepared by one of the authors of the Waikato Regional Retail Strategy (Speer, August 2009). This reiterated the adequacy of existing and planned capacity for retail growth in established centres and zoned land, with development planning well advanced on many sites. With recent short-term softening of demand expected to continue, it was again concluded that capacity was sufficient “to enable a wide range of retail activities to develop over about a 20 year timeframe”. It rejected the need for retailing in the industrial zone which it saw as contrary to the Future Proof strategy of supporting existing commercial and retail centres. The Variation 21 Section 32 report endorsed the normative approach (an approach seeking to achieve prescribed or predetermined outcomes) to the retail hierarchy developed in Future Proof, with “Hamilton CityHeart” at the top of the hierarchy. It also picked up on the HUGS proposed strategy emphasising intensification around the city centre, “with the main focus being around the CBD and at higher densities than anywhere else in the subregion” (P.10). It states that: “it is evident that the CBD represents the concentration of long-standing significant public and private sector investment in resources ...that provide for the social and economic well-being of the

Hamilton Retail Review 31 subregion’s varied communities and has a particular role in meeting the needs of the city population itself. It is a complex and diverse environment that relies heavily on the scale, intensity and interaction of activities is to sustain its role as the focal point for the city and subregion. “The key to the future vibrancy and vitality of the CBD is maintaining this diversity of activities, facilities and places as desirable destinations for the population as a whole, 24/7” (pp.12-13). Consequently the following issues were identified with reference to resource management: 1. Maintaining and enhancing the diversity, vitality and vibrancy of the CBD; 2. Accommodating future subregional population and employment, and promoting sustainable urban development and city living; 3. Promoting efficient provision of public infrastructure and services; and 4. Managing the effects of dispersal of business activities (office and retail, community and social services) throughout Industrial and Commercial Service areas (P.25). The section 32 analysis goes further than the Waikato Regional Retail Strategy, though, suggesting, for the first time, that the rapid growth of the Te Rapa corridor is a cause of the slowdown in the CBD: “consequently, the vibrancy and vitality of the CBD is potentially being adversely affected and less efficient use is being made of existing and ongoing investment in public services, amenity areas and infrastructure in the CBD. A continuation of this trend enabled by the current district plan provisions would undermine the overall performance of the CBD and its enabling role in terms of helping local communities continue (sic) to meet their social and economic needs “(p.28). Consequently, this report supports Proposed Variation 12 of the District Plan in elevating the objective of promoting a vibrant central city area: “to recognise and provide for the central area and the city centre in particular as the principal focus for commercial and community activity serving Hamilton and the wider subregion” (p.38). Other measures to do this include directing intensive travel generating development to the CBD. The section 32 report does not explain the advantages of utilising central city-based infrastructure compared with increasing the intensity of land use and utilisation of infrastructure at localities closer to areas identified for population growth or, as in the case of The Base, with better road access for much of the city and subregion. Nor does it establish how the central city better provides for the social and economic well-being of the subregion’s varied communities any more or less than other centres (most of which meet the lower and more frequent needs of residents), nor elaborate the particular role [it plays] in meeting the needs of the city population itself other than the fact that it accommodates diverse services. In the event, Variation 21 did not proceed and the amendments proposed were held over for the review of the district plan.

Conclusion: Proposed Variation 21 to the Operative District Plan While Variation 21 articulated more fully the emergent policy of limiting activity elsewhere as a method of promoting the CBD, it offered no more evidence or analysis that this would necessarily achieve the objective of a “vibrant city centre” or that it would lead to more efficient and economical use of infrastructure in the city.

Hamilton Retail Review 32 3.7 The Hamilton Urban Growth Strategy June 2010 Following submissions to the proposed strategy the finalised Hamilton Urban Growth Strategy (HUGS) was published in 2010. This promoted a shift towards an increasingly compact city. The favoured “Growth Approach 1” suggested that “over the next 10-20 years approximately 50% of new dwellings would be provided through regeneration of existing parts of the city, focus around the CityHeart, transport hubs, town centres and areas of high public amenity (p.8). Beyond that, Growth Approach 2 commits to completing the development of Rototuna and proceeding with Peacocke and Rotokauri as residential growth cells, allowing for a greater range of residential environments, including “compact type developments” (p.11), with Peacocke growth seen as occurring mainly “in the longer term” under Growth Approach 3 (p.13). Growth Approach 4 provides for increased employment in the Ruakura based on expansion around the existing Innovation Park. Among other things, this will increase transport efficiency by adding to employment opportunities distributed around the city (p.14).

Conclusion: the Hamilton Urban Growth Strategy The Urban Growth Strategy reinforces the focus on consolidation and effective utilisation of existing services and centres contained in the PRPS. It goes further to the extent that it sets an infill target to be met by providing for new dwellings in existing suburbs especially those close to the city centre. It does not, however, propose limiting investment elsewhere as a means of promoting the CBD.

3.8 Future Proof Business Land Reconciliation The Future Proof Business Land Reconciliation was prepared in 2010 to explain differences between the Business Land Assessment and Business Land Review reports commissioned by the Future Proof Partners and the Future Proof section of the Proposed Waikato Regional Policy Statement. In the view of the authors of the Future Proof Business Land Review the shift from land demand estimates in the original documents reflects “a disconnect between the Future Proof policies and principles, particularly those relating to compact urban form, sustainability and live, work, play, and the allocation of industrial land in Table 5 [of the Future Proof Strategy and Implementation Final Report, p.65] which promotes dispersed industrial employment land pattern in locations not necessarily connected to existing and future urban populations” (p.vi). The adjustments reinforced the potential expansion of business land in the north of the sub-region early in the period (Rotokauri and Ruakura) although reduced it (to a lesser extent) in Te Rapa North, Most of the changes were around those areas subject to the greatest uncertainty – the timing of detailed land allocations in particular cells. Gross long-term expectations were not adjusted and the northern emphasis of additional industrial employment land was reinforced. The Future Proof Business Land Review also proposed a relatively detailed commercial hierarchy prioritising intensification of existing retail centres. The PRPS has a more limited hierarchy allowing district plans to deal with the detail and excluding large format centres. The reconciliation of recommended business land allocation and what was included in the regional policy statement concludes that there is sufficient flexibility built into the latter to reflect any changes that might arise in the location and timing of demand for land. It would also enable individual councils to fine tune implementation within the district plans.

Hamilton Retail Review 33 Conclusion: Future Proof Business Land Reconciliation The review confirmed the likely future decentralisation of employment and repeated the idea that arose following Future Proof, that development should be managed through a hierarchy of centres.

3.9 Section 32 Analysis, Proposed Hamilton District Plan Among other things the Section 32 analysis for PDP aims to achieve: “the sustainable management of the distinctive business centres identified in a business centre hierarchy that will support the primacy of the central city and that will provide a focus for new sustainable business enterprises.… Further, it promotes: Adoption of a business centres hierarchy … to promote sustainable urban development… In terms of maintaining and reinforcing the vibrancy and vitality of existing centres, consolidating urban development and identifying areas where intensification for residential and commercial activities…” (P.6-1]. These provisions are seen as giving effect to the PWRPS, in which policy 6.15C gives: “a clear mandate … to encourage the greatest diversity, scale and intensity of activities in the Hamilton Central City and to avoid or manage adverse effects from activities which affect the function, vitality or amenity of the Central City. “Te Rapa North or The Base commercial centre and Chartwell are identified as “subregional centres”, being second-tier centres with roles and functions below the Hamilton central city in the hierarchy of commercial activities”. (Proposed Hamilton City District Plan, pp. 6-1, 6-2) Among the reasons for reinforcing a hierarchy is that “higher order centres reflect higher levels of investment in the public realm to provide higher amenity, public accessible spaces for people in business activities” (p.6-3). Accessibility should also mean greater opportunity for public and private investment in infrastructure and community facilities. The Base and Chartwell are identified as subregional centres on high order transport corridors serving a large citywide catchment and neighbouring towns and settlements in Waikato and Waipa districts. These two centres are clearly different in form and function, though. Chartwell is close to fully developed while The Base has substantial space for further development (subject to a comprehensive consent with a 10 year period granted in 2011). Functional (activity and catchment) differences were identified in the WRRS while Chartwell is located on a suburban arterial road and Te Rapa is historically the principle point of entry to the city. Suburban centres are provided for in Rotokauri, Rototuna and Peacocke, but Ruakura is omitted as a suburban centre (p. 6-5). Qualifying objectives and policies supporting the growth of The Base, Chartwell, and suburban centres by “not undermining the primacy, vitality or viability of the Central City” is justified in in terms of the hierarchy of centres set out in the PRPS (Policy 6-5, Table 6-23) and on the grounds that they manage “the use and development of natural and physical resources in an efficient manner” (p6-7). However, no evidence of a causal link between the growth of subordinate centres and changes in the city centre is offered to support this caveat on the growth of second and third tier centres, or why centralisation is the likely to give rise to the most efficient use of resources.

Hamilton Retail Review 34 The rationale for the priority accorded to the CBD is pitched in general terms, referring to the promotion of “a sustainable metropolitan centre” that provides for social, economic, and cultural wellbeing. (p.7-3). This is presumably based on the fact that the centre is where many of the services – especially the higher order services -- that the population might use are based. However, the proposition that promoting the CBD is justified in terms of providing for the well-being of the community is neither tested against the evidence of trip-making behaviour and costs nor evaluated against the alternative of, for example, services distributed through a network of centres aligned more closely with the distribution of where people live and work. Nevertheless, individual policies within the PDP are largely justified in terms of design prescriptions and purported economic benefits to the community from centralisation, opportunities offered by increased accessibility, and the restraint of urban sprawl (p.7-7).

Conclusion: Section 32 Analysis, Proposed District Plan The Section 32 analysis provides a rationale but no evidence to support moving from a retail strategy based on consolidating capacity across existing or planned centres to one directed at sustaining a hierarchy based on the differential treatment of investment among them and by limiting competitive investment outside the city centre.

3.10 Conclusions The policies in the PDP aimed at influencing the distribution of retailing among centres go beyond the principles of urban containment, land use intensification, and integrated planning evident in the precedent planning documents, particularly the Proposed Regional Policy Statement. They are informed more by a series of principles that are enunciated in documents following the Proposed Variation 21 than by any theoretical framework or empirical analysis that demonstrates how development at one level of the hierarchy directly impacts on development and on the resource management issues pertaining to another level. Instead, a view emerges that limiting what investment is allowed outside the central city will see more investment take place inside it. In expectation of such a policy outcome, the PDP creates a largely permissive and expanded zoning for commercial activity in the central city and applies it over a greater area than the CBD per se, while incorporating provisions to limit growth in other centres. Even in these provisions the application of principles informed by earlier documents appears partial. For example, the physical expansion of the central city is inconsistent with development of a compact CBD defined by comfortable walking distances, and is likely to encourage significant localised car- based trips. Similarly, allowing large format retailing around the CBD fringe is inconsistent with the view that such activity should be excluded from the CBD in the interests of more intensive land use and more active street frontages. The empirical analysis underlying the plan, dealing with the distribution of existing capacity, future demand and floorspace needs in the Future Proof subregion, supports a centres-based strategy. It does not support a shift from retaining the integrity and quality of existing centres across the board to one promoting the primacy of the CBD at the expense of subregional and suburban centres and, potentially, to the detriment of the CBD as an attractive destination.

Hamilton Retail Review 35 However, the progression through a range of documents, including the non-statutory documents (Future Proof and the Hamilton Urban Growth Study) appears to shift the policy emphasis to the centralisation of commercial activities as a key component of urban consolidation.

Conclusion: The Proposed District Plan Policy Trail While the CBD clearly serves a citywide and regional catchment, the mix of current and future activities and uses underpinning its central role are not analysed in any the documents considered. The only evidential documents, the Waikato Regional Retail Study and the technical report for the Hamilton Urban Growth Strategy – describe the network of centres, confirming their capacity to accommodate retail growth, and highlighting the significance of the central city. The latter study also emphasises the importance of taking initiatives to maintain CBD vibrancy. The Regional Policy Statement promotes a policy of containment and consolidation, and also recognises the role of the CBD as the region’s primary commercial centre. It is only when Variation 21 was introduced that a policy of limiting investment in other centres as a means of propping up the CBD was introduced, with no new evidence to justify doing so apparent in the underlying Section 32 report. Despite withdrawal of Variation 21, this policy stance has been adopted in the Proposed District Plan.

Hamilton Retail Review 36 4 The Changing Distribution of Retailing in Hamilton

The preceding discussion traces a series of policy documents that proceed from the study of evolving retail demand and supply fashioned around the different roles of centres, to documents containing an increasingly detailed series of policies aimed at retaining existing differentiation and prioritising growth in the central city by qualifying what might take place in subordinate centres. This section examines changes in the distribution of retailing in Hamilton, and explores potential underlying drivers with a view to developing an evidence-based view of how retailing might be expected to develop in Hamilton in the future. A number of different indicators and analyses are presented on the grounds than no one piece of information gives the complete picture, and that an improved understanding comes from scanning a variety of sources.

4.1 The Analytical Framework The analysis underpinning the Proposed Waikato Regional Policy Statement and the Proposed Hamilton District Plan (the Waikato Regional Retail Study) is based on information largely predating the impact of the Global Financial Crisis (GFC). The period since 2007 has seen significant changes taking place in economic activity, including household spending, business profitability and viability, and consequently the retail environment. These changes are ongoing in what has turned out to be a prolonged, potentially enduring downturn among developed nations generally. Consequently, it is difficult to project future activity. Projections of “more of the same” or linear trends are unlikely to be particularly helpful. In considering the approach to urban centres and retailing adopted in the PDP, it is important to understand the shifts that are taking place in retailing (and the economy generally) and to consider their implications both for the City’s growth and how it might best be planned. This is the focus of the present section. It examines a range of indicators that suggest how retailing has evolved in Hamilton over the past 12 years, providing a reasonably up-to-date, evidence based foundation for thinking about how it might evolve in the future. The review draws on employment, building consent, and valuation data. In each case statistics were accumulated from 2000 to 2012 by Census Area Unit (CAU). For the present report of trends these figures have been aggregated into ten geographic sectors (defined in 0). Three of these contain Hamilton’s major retail precincts. Hamilton Central CAU contains the CBD and central city. Te Rapa CAU contains The Base, Te Awa and a number of large format retailers located in industrial zones. Chedworth CAU contains Chartwell Square mall and Chartwell suburban centre. While CAUs are only approximations of the individual centres, containing rather than circumscribing them, those centres dominate retail and associated service trends within these three CAUs. Te Rapa, the Northwest, and Northeast sectors encompass the northern part of the city; the West, Central, and East sectors comprise a central band of suburbs close to Hamilton Central (also termed the city centre in this report, and encompassing the CBD); and the Southeast and South comprise the southern part of the city. While these allocations are arbitrary, plotting differences among them aids an understanding of the shifts taking place in the distribution of population and employment in the recent past, and provides a framework for thinking about where growth will occur.

Hamilton Retail Review 37 Table 5 Allocation of Census Area Units to Geographic Sectors

528403 Te Rapa (Includes The EAST Base and Te Awa) 529700 Hamilton Central 529501 Porritt (Includes the CBD) 529402 Chedworth (includes 529502 Insoll Chartwelll) NORTH WEST 529503 Fairview Downs 528405 Burbush 529600 Chartwell 528406 Rotokauri 529800 Clarkin WEST 529900 Claudelands 528501 Nawton 530000 Enderley 528503 Crawshaw 530100 Peachgrove 528504 Grandview CENTRAL 528505 Brymer 528800 Maeroa 528601 Dinsdale North 528900 Frankton Junction 528602 Dinsdale South 529100 Hamilton Lake 528700 Beerescourt SOUTH EAST 529000 Swarbrick 530200 Hamilton East 527820 Temple View 530300 Naylor NORTH EAST 530500 University 527005 Sylvester 530600 Silverdale 527006 Flagstaff 530700 Hillcrest West 527007 Horsham Downs 530800 Riverlea 527008 Rototuna SOUTH 527009 Huntington 529200 Melville 528310 Bryant 529300 Glenview 528320 Pukete 530400 Bader 528402 Pukete West 527810 Peacocke 529401 Queenwood

4.2 The Data A range of indicators has been assembled for these geographic sectors. Population (all residents) is based on Statistics New Zealand estimates for June each year. Employment (all jobs) is based on Business Directory counts at February each year. Building consent data is summarised by December years. Property valuation data, sourced from Property IQ, is based on an annual June snapshot. Dollar values have been expressed in current terms (dollars of the day) as they are used for comparing different parts of the city. Adjustments for inflation would not have altered relativities among them.

4.3 The Questions Analysis of the policy trail revealed several themes underpinning policies influencing retailing and commercial activity in the Proposed Hamilton District Plan:  Efficient land use will be served by accommodating growth in existing centres in a way which reflects their current functions. This reflects but does not necessarily follow from analysis indicating that current and planned capacity is adequate for the foreseeable (20 year) future.  Given adequate capacity for retailing, the efficiency of a centres-based strategy, and the need for industrial land, no provision will be made for large format retailing in the industrial zone;

Hamilton Retail Review 38  The relatively poor performance of the CBD requires policies to promote the diversity and vibrancy of the central city. These include providing for a wider range of uses over a wider area in the central city and curtailing activity elsewhere in the hierarchy if it is seen to prejudice the development of the CBD. This policy stance raises several questions which the underlying documents do not appear to address:  What is the nature of the relationship between growth rates in the central city and in other centres, and this relationship likely to be influenced by rules limiting what can be undertaken in the latter relative to the former?  In the light of a prolonged slowdown in growth (accompanying the GFC), how is the shape of the hierarchy changing, and what are the drivers of change?  Will rules limiting activities in subregional or suburban centres increase activity in the central city?  Will constraints on subregional and suburban centres reduce the attractiveness of retail and employment opportunities in Hamilton generally?  Will any loss of investment and reduced productivity as a result of such rules be sufficient to further undermine the CBD, assuming that it increasingly depends on public and private discretionary expenditure for diversity and vibrancy? This section provides an empirical background against which to address these questions.

4.4 The Recent Picture Catchment data was compiled for the main retail centres (Figure 6) by Property Economics in April 2010 based on vehicle registration surveys. These gave rise to slightly different results from those cited by Speer and Starr earlier (see Section 3.2, above). Some 38% of CBD shoppers came from outside the city, with the balance drawn from throughout the city, with stronger penetration in the south. This compared with 45% from outside Hamilton at The Base, which also had greater penetration in the northern and western suburbs (pp12-13), Like the CBD, Chartwell drew 62% of its customers from within Hamilton compared with 55% for The Base. As the longest established and pre-eminent mall at the time of the survey Chartwell was still attracting shoppers from across the city and the subregion. However, this was considered likely to change with the opening of the new mall at The Base (Te Awa). The latest report to Tainui Group Holdings by retail analyst Marketview Ltd (January 2013) confirms The Base as a regional centre, with 52% of spending at The Base (combing both the open largely-LFR centre and Te Awa Mall). The same data indicates that 61% of The Base (LFR) customers and 57% of Te Awa Hamilton customers were drawn from then northwest and northeast of the city. In terms of retail floorspace, the Property Economics report more or less aligns with the survey undertaken two years earlier by Speer and Starr (Table 6). It confirms the strong dominance of Hamilton city centre and surrounds, accounting for around 48% of the city total. While The Base is clearly the second largest centre, the development of large format stores on stand-alone sites in the industrial zone has contributed further to the retail role of Te Rapa CAU. On these measures, it would appear that while The Base incorporating Te Awa contains a much smaller area of retailing than the CBD and surrounds, but nevertheless operates as a significant regional centre given its attraction to and dependence on custom from outside the city. It follows that

Hamilton Retail Review 39 any measures that might curtail its growth would act against that role, potentially diminishing the regional commercial role of Hamilton City as a whole.

Figure 6 Principal Shopping Centres, Hamilton

Source: Property Economics (2010), Figure 11, p17

Table 6 Floorspace Estimates for The Retail Hierarchy

Source: Speer & Starr 2009 Property Economics 2010 No. Share Net Share GFA* Share CBD Core & Fringe 150,000 39% 123,838 40% 184,054 41% CBD Main Centres 28,000 7% 23,291 7% 33,273 7% The Base 36,000 9% 47,575 15% 67,964 15% Te Rapa 40,000 10% 50,058 16% 71,511 16% Chartwell & Lynden Court 27,000 7% 19,831 6% 28,330 6% Suburban 82,000 22% 0% 0% Neighbourhood 18,000 5% 0% 0% Hillcrest 3,394 1% 4,849 1% Nawton 2,909 1% 4,156 1% Dinsdale 6,898 2% 9,854 2% Rototuna 7,973 3% 11,390 3% Other Centres 27,180 9% 38,859 9% Total 381,000 100% 312,947 100% 454,240 100%

Hamilton Retail Review 40 Conclusion: Floorspace Estimates Different measurement conventions are likely to be the main explanation for differences between the two sets of estimates made in separate studies two years apart. Allowing for that, the size of the difference suggests that Property Economics’ more recent assessment reflects a narrowing of the gap between the central city and The Base (primarily through the opening of Te Awa) , although the former remains dominant. The key to this may well be the strong regional role of The Base.

The balance of this section uses a variety of data to examine recent shifts in retail and associated activity in Hamilton, and the implications for future development.

4.5 Population and Employment Growth Table 7 summarises population and employment data across geographic sectors in 2006 and 2012. It confirms decentralisation in both. Hamilton Central CAU and the eastern and central suburbs grew modestly, jointly accounting for just 13% of city population growth over the six years despite housing 21% of its population in 2006. By contrast, the northeast, also with 21% of population in 2006, absorbed 52% of subsequent growth. Within the northeast Huntingdon, Sylvester and Horsham Downs CAUs on the northern edge jointly accounted for almost 50% of the city-wide gain. The north clearly dominates absolute growth. However, the central city experienced strong growth from a small base, the north clearly dominates in absolute terms, although the adjoining central and eastern suburbs experienced far lower growth. Table 7 Population and Employment Distribution, Hamilton 2006 and 2012

Population Employment Retail Employment Jobs/ Retail % 2006 Total Share Total Share Resident Jobs Te Rapa 230 0% 12,380 17% 1,390 18% 53.8 11% Northwest 400 0% 2,370 3% 12 0% 5.9 1% West 29,970 20% 3,750 5% 609 8% 0.1 16% Northeast 31,430 21% 2,355 3% 91 1% 0.1 4% East 22,980 16% 4,240 6% 297 4% 0.2 7% Hamilton Central 2,820 2% 22,300 30% 3,520 46% 7.9 16% Central 9,520 6% 16,900 23% 806 10% 1.8 5% Southeast 22,410 15% 7,580 10% 573 7% 0.3 8% South 14,630 10% 1,510 2% 205 3% 0.1 14% Total 134,390 91% 73,385 100% 7,503 97% 0.5 10%

Population Employment Retail Employment Jobs/ Retail % 2012 Total Share Shift 06-12 Total Share Shift 06-12 Shift 06-12 Resident Jobs Te Rapa 390 0% 70% 13,940 19% 13% 2,440 32% 76% 35.7 18% Northwest 410 0% 2% 2,310 3% -3% 30 0% 150% 5.6 1% West 31,720 21% 6% 3,120 4% -17% 498 6% -18% 0.1 16% Northeast 38,450 26% 22% 3,210 4% 36% 441 6% 385% 0.1 14% East 24,110 16% 5% 4,720 6% 11% 227 3% -24% 0.2 5% Hamilton Central 3,200 2% 13% 18,900 26% -15% 2,540 33% -28% 5.9 13% Central 9,790 7% 3% 16,880 23% 0% 624 8% -23% 1.7 4% Southeast 24,480 17% 9% 9,020 12% 19% 563 7% -2% 0.4 6% South 15,260 10% 4% 1,445 2% -4% 346 4% 69% 0.1 24% Total 147,810 100% 10% 73,545 100% 0% 7,709 100% 3% 0.5 10% Source: Statistics New Zealand While it remains concentrated in and around the central city, there are also signs of employment decentralisation. During the last six years there was virtually no net gain in jobs across the city. However, the northeast, eastern, and south-eastern suburbs, along with Te Rapa, posted significant growth while the city centre experienced a contraction. The balance of this section examines these shifts in population, employment, and retailing more closely to establish grounds for considering how they might change in the future.

Hamilton Retail Review 41 4.6 Population

4.6.1 Recent Trends The decentralisation of population reflects a northern shift in residential development. The north- eastern, north-western, and Te Rapa sectors accounted for 18% of the population in 1996. Over the next 15 years they absorbed 56% of the city’s growth; by 2012 their share reached 26% of the total. Current plans mean that residential development in the north of the city should prevail over the next twenty years. Continuing momentum in the north-eastern suburbs of Sylvester, and Horsham Downs will be supplemented by planned development in the northwest in Rotokauri, Burbush (Figure 7).

Figure 7 Population Trends and Prospects by Geographic Sector, 1996 to 2031

60,000 Sectors Northeast West Statistics New Zealand Medium Projection East 50,000 Southeast South Northwest Central Hamilton Central 40,000 Te Rapa

30,000 Population

20,000

10,000

0 1996 2001 2006 2011 2016 2021 2026 2031 Source: Statistics New Zealand The District Plan could modify the distribution of growth by creating additional residential capacity closer to the CBD and facilitating redevelopment and infill housing. However, there is little, if any, evidence or analysis in the underlying reports of the cost of doing so, or of the likelihood that infill or inner city residential capacity would be taken up in preference to suburban living or that its availability would reduce the momentum of development in the north of the city. 7 The fact that Hamilton is already reasonably compact and given the concentration of planning for new capacity and infrastructure on the north coupled with a sound and improving arterial road system the current Statistics New Zealand population projections are a reasonable basis for planning future capacity to meet new demand for employment, shopping, amenity, and service needs. The likely outcome of provisions for more inner city living is likely to be modest in the light of recent trends favouring suburbanisation and consequently continuing decentralisation of demand for consumer goods and services. Already this is reflected in the city’s arterial road network (Figure 8).

7 The growing strength of resistance to proposals for intensification under Auckland’s Draft Unitary Plan illustrates the risks that of such a policy in Hamilton where the need for intensification is less obvious.

Hamilton Retail Review 42 Figure 8 Hamilton Arterial Road Network

One likely effect of the city bypass will be to improve access from outside Hamilton to access to The Base, an effect that will be more pronounced than any improving travel time to the CBD which may be penalised by the already more heavily trafficked nature of nearby roads. . In addition, it may reduce the propensity for through travellers on to undertake impulse or convenience shopping en route. Another effect of recent and current road development may be to facilitate the movement of local traffic from the west and south of Hamilton itself to The Base. The recently completed Wairere Drive will do much the same for residents of the current and future eastern and north-eastern suburbs. A positive outcome for the CBD may be that a reduction in through-traffic creates opportunities for redevelopment, encouraging property and business owners to accelerate refurbishment and replacement of ageing building stock. This would enhance the opportunities for inner city living and attraction to visitors by reducing traffic density and lifting the quality of the public domain, as already demonstrated in improvements in Victoria Street.

Conclusion: Distribution of Population Growth There is a relatively long-standing and entrenched trend favouring population growth in the northern suburbs of Hamilton, well ahead of growth in the central and southern suburbs. This is unlikely to diminish in the foreseeable future. Among other things, the enhanced city road system favours the development of strong retail centres in and close to growth areas rather than in the city centre. The Base contributes to this opportunity in the northern part of Hamilton, while the data suggests it also attracts substantial custom from the regional areas north of the city.

Hamilton Retail Review 43 4.7 Employment Trends within Hamilton 2000 to 2012 (the period for which comprehensive employment data is available8) was a decade of two halves. Employment grew by 31% over the first six years; but fell by 4% over second (Figure 9). Te Rapa and the Southeast (University CAU) were the only areas with significant job gains 2006 to 2012, of 1,010 and 1,370. The central city and central suburbs recorded falls of -3,300 and -1,370 jobs respectively. The north-eastern suburbs held their own with a modest gain of 300 jobs. Areas north of the CBD - in Te Rapa, the north-eastern and north-western CAUs -- accounted for 48% of Hamilton’s job growth from 2000 to 2012, increasing from 21% of the total in 2006 to 28% in 2012. The Te Rapa share grew from 13% to 19%. By contrast the central city and surrounding central suburbs accounted for just 7% of growth and fell from 32% to 25% of total employment.

Figure 9 Total Employment Shifts by Area, 1996-2031

Source: Statistics NZ Subnational Population Estimates

4.7.1 Changing Central City Employment Table 8 is a snapshot of employment in the Central area in 2000, 2006, and 2012. It reveals significant structural change. The majority of sectors declined relative to the rest of the city. Retail declined from 17% of central city jobs in 2000 to 13% in 2012. The exceptions were professional, scientific, and technical services (from 11% to 18%)and health and social assistance (from 10% to 12%). A number of sectors recorded greater rates of decline than retailing: manufacturing, construction, wholesaling, transport, and communications. Business and public services became dominant, each accounting for around 30% of CBD employment in 2012. These changes appear to have increased the specialisation and skills located in the CBD as an apparent boom in administrative and support services came to an end and professional, scientific, and technical services enjoyed strong growth.

8 Counted as all jobs as at February each year; sourced from the Statistics NZ , Business Directory

Hamilton Retail Review 44 Table 8 Non-Primary Sector Employment Changes in the CBD, 2000-2012

Employment Shift Share of CBD Share of City 2000-06 2006-12 2000-12 2000 2006 2012 No % No % No % 2000 2006 2012 2000 2006 2012 Manufacturing 340 220 130 -120 -35% -90 -26% -210 -62% 2% 1% 1% 5% 2% 2% Utilities 250 95 260 -155 -62% 165 66% 10 4% 1% 0% 1% 56% 23% 37% Construction 130 160 80 30 23% -80 -62% -50 -38% 1% 1% 0% 4% 3% 2% Wholesaling 670 600 510 -70 -10% -90 -13% -160 -24% 4% 3% 3% 21% 14% 12% Retailing 3,100 3,520 2,540 420 14% -980 -32% -560 -18% 17% 16% 13% 48% 43% 30% Hospitality 1,680 1,980 1,980 300 18% 0 0% 300 18% 9% 9% 10% 50% 44% 43% Transport, Postal, Warehousing 420 480 300 60 14% -180 -43% -120 -29% 2% 2% 2% 22% 25% 18% Information & Communications 850 950 610 100 12% -340 -40% -240 -28% 5% 4% 3% 42% 49% 54% Financial & Insurance Services 1,280 1,230 1,110 -50 -4% -120 -9% -170 -13% 7% 6% 6% 83% 75% 72% Rental, Hiring, Real Estate 220 340 330 120 55% -10 -5% 110 50% 1% 2% 2% 37% 40% 39% Professional, Scientific, Technical 1,910 2,530 3,310 620 32% 780 41% 1,400 73% 11% 11% 18% 61% 51% 51% Admin & Support Servcies 920 3,190 810 2,270 247% -2,380 -259% -110 -12% 5% 14% 4% 36% 55% 21% Public Admin & Safety 2,090 2,150 2,080 60 3% -70 -3% -10 0% 12% 10% 11% 72% 65% 50% Education & Training 1,050 1,040 1,340 -10 -1% 300 29% 290 28% 6% 5% 7% 17% 15% 17% Health & Social Care 1,840 2,110 2,170 270 15% 60 3% 330 18% 10% 9% 12% 23% 21% 17% Arts & Recreation 320 750 480 430 134% -270 -84% 160 50% 2% 3% 3% 36% 50% 35% Other Services 790 940 820 150 19% -120 -15% 30 4% 4% 4% 4% 35% 29% 28% Total Non-Primary 17,860 22,285 18,860 4,425 25% -3,425 -19% 1,000 6% 100% 100% 100% 31% 30% 25% Source: Business Directory, Statistics New Zealand Explanation:

 Total Employment is total jobs (part-time and full-time) as at February.  Shifts are six-yearly and twelve-yearly changes in total employment, also expressed as a % of the starting year in each case. There was a gain of 4,425 non-primary jobs between 2000 and 2006 (to 33,180), but a loss of 3,425 between 2006 and 2012 (to 22,285) for a net gain over the 12 years of 1,000.  Share of CBD is employees in each sector as a share of total CBD employees.  Share of City is each sector’s share of total Hamilton City employment located in the CBD in that sector. For industry as a whole this has declined over the whole period from 31% to 25%, which means growth has been more rapid outside the CBD than inside it. CBD retailing it has fallen from 48% to 30% of the city’s total retail jobs.  Over the last five years CBD employment as a share of city-wide employment has declined in every sector other than utilities, Information, Media, and Communications, and Education and Training. The first two are only minor employers in the CBD (1% and 3% of CBD jobs respectively), while of them only education and training grew between 2006 and 2012.

Hamilton Retail Review 45 Conclusion: Changing Distribution of Employment Although accounting for 28% of the net contraction in the CBD since 2006, the run-down of retailing was substantially less than the loss across a range of business services. In particular, business administration gave back all the gains it made over the previous six years. While the professional, technical, and scientific sector, education and health grew, a net contraction of central city employment of 3,435 jobs (2,445 excluding retailing) suggests that any loss of retailing is related to the contraction of activity generally within the CBD rather than to expansion taking place outside it.

4.7.2 The CBD Experience Elsewhere In order to put the absolute and relative decline in CBD employment into context, employment shifts have been assessed for New Zealand’s six largest cities, including Hamilton (Table 9). There was a significant reduction in the share of employment located within the CBD in Tauranga and, to a lesser extent, Dunedin. In Auckland’s case there was some recovery following the post-2007 downturn, while the reductions in share for Wellington and Christchurch were minor. The data suggests that the concentration of retail in the CBD is inversely related to the size of the city. The CBD contains only 6% of Auckland’s retailing, with even less concentrated in the Wellington CBD relative to the wider urban area (including Upper and Lower Hutt cities and Porirua). The implication is that as Hamilton expands retailing might be expected to diminish further in the city centre. Much the same appears to go for the hospitality sector (cafes, restaurants, and accommodation). Table 9 Shares of City Employment in the CBD, Six Cities

All Industry Retailing Hospitality 2000 2006 2012 2000 2006 2012 2000 2006 2012 Auckland 14.0% 13.2% 14.1% 5.9% 6.2% 5.9% 24.6% 21.6% 21.7% Hamilton 31.7% 30.0% 25.2% 47.8% 43.1% 30.4% 49.7% 44.2% 43.0% Tauranga 26.0% 23.4% 22.2% 38.1% 35.5% 35.9% 9.6% 10.1% 8.1% Wellington 37.5% 37.0% 37.0% 5.8% 6.4% 5.6% 7.0% 7.0% 8.0% Christchurch* 29.3% 28.0% 28.0% 26.3% 23.7% 21.2% 38.1% 35.5% 35.9% Dunedin 32.0% 32.4% 30.0% 43.9% 38.5% 34.8% 35.9% 40.9% 31.6% Note: * Christchurch data for 2010 (pre-earthquake), not 2012 Source: Business Directory, Statistics New Zealand Analysis of the changing structure of CBD employment in each of the cities in Table 9, with structure described by sector shares of all CBD employment. The 2006 to 2012 change in employment in each sector has been considered in relation to change at the city-wide level (Table 10). Looking to the shares of CBD employment by sector in 2012, the Professional, Scientific and Technical service sector is a major player across all cities - with the exception, perhaps, of Dunedin. Transport, postal, and warehousing activity (logistics) and information, telecommunications and media (communications) are more important in Auckland CBD than elsewhere. Financial services are most significant in Auckland and Wellington. Public administration is unsurprisingly critical in Wellington. It is also significant in CBD employment in the smaller cities, Hamilton, Tauranga, and Dunedin.

Hamilton Retail Review 46 Table 10 Structural Shifts in the Central City, Six Cities 2006-2012

Auckland Hamilton Tauranga CBD Employment 2012 Actual-Expected CBD Employment 2012 Actual-Expected CBD Employment 2012 Actual-Expected Number % of CBD Number % Diff. Number % of CBD Number % Diff. Number % of CBD Number % Diff. Manufacturing 1,050 1% -13 -16% 130 1% -46 -26% 220 2% -72 -25% Utilities 138 0% 38 163% 260 1% 99 62% 3 0% 3 n.a. Construction 525 1% -56 -5% 80 0% -65 -45% 250 2% -21 -8% Wholesale Trade 2,470 3% 105 317% 510 3% -90 -15% 380 3% -26 -6% Retail Trade 3,590 4% -216 -29% 2,540 13% -1,062 -29% 1,420 13% -607 -30% Hospitality 9,190 10% 379 18% 1,980 10% -53 -3% 880 8% -223 -20% Logistics 4,350 5% -197 -5% 300 2% -113 -27% 70 1% 1 1% Information, Media, Telecoms6,790 8% 71 1% 610 3% 62 11% 350 3% -19 -5% Financial Services 14,150 16% -884 -17% 1,110 6% -38 -3% 510 5% -74 -13% Rental, Hiring, Real Estate1,910 2% 1,200 21% 330 2% -14 -4% 240 2% -30 -11% Prof. & Scientific Services18,520 21% 2,177 18% 3,310 18% 16 0% 1,460 13% -108 -7% Admin. Services 9,280 10% 232 14% 810 4% -1,335 -62% 1,070 10% 54 5% Public Administration 5,090 6% 232 1% 2,080 11% -580 -22% 1,200 11% 45 4% Education 7,400 8% 597 7% 1,340 7% 143 12% 410 4% -56 -12% Health & Social Care 850 1% -1,748 -26% 2,170 12% -416 -16% 1,920 18% 400 26% Arts & Recreation 2,560 3% -756 -9% 480 3% -215 -31% 170 2% -108 -39% Other Services 1,670 2% 170 25% 820 4% -35 -4% 360 3% -75 -17% Total 89,533 100% 10 0% 18,860 100% -3,807 -17% 10,913 101% -917 -8%

Wellington Christchurch Dunedin CBD Employment 2012 Actual-Expected CBD Employment 2010 Actual-Expected CBD Employment 2012 Actual-Expected Number % of CBD Number % Diff. Number % of CBD Number % Diff. Number % of CBD Number % Diff. Manufacturing 1160 2% 37 77% 1110 2% -162 -13% 3,690 2% -243 -46% Utilities 800 1% 16 9% 430 1% -54 -11% 340 2% 146 154% Construction 740 1% 73 7% 465 1% -31 -6% 3,190 1% 4 4% Wholesale Trade 2060 3% -229 -22% 1270 2% -44 -3% 2,070 2% 22 9% Retail Trade 4270 6% -16 -2% 4280 8% -506 -11% 6,180 14% -232 -10% Hospitality 6120 8% -92 -4% 4840 9% 46 1% 4,680 9% -435 -23% Logistics 630 1% -243 -5% 1035 2% -958 -48% 2,050 1% 10 7% Information, Media, Telecoms4200 5% 448 8% 2750 5% -101 -4% 1,100 6% -58 -6% Financial Services 8390 11% -827 -57% 2490 5% -446 -15% 990 4% 11 2% Rental, Hiring, Real Estate Services670 1% 160 4% 735 1% -169 -19% 680 1% -8 -4% Professional & Scientific 15700Services 20% -135 -2% 7040 14% -493 -7% 3,160 10% -105 -7% Administrative Services 6010 8% 8 1% 4690 9% 218 5% 2,420 6% -260 -21% Public Administration 16100 21% 1,023 7% 4810 9% 754 19% 2,630 11% 80 5% Education 2150 3% 344 6% 3180 6% -77 -2% 7,140 4% 115 21% Health & Social Care 2280 3% -249 -2% 8670 17% 835 11% 8,360 21% -708 -17% Arts & Recreation 2210 3% -337 -14% 1395 3% -87 -6% 1,490 3% -38 -7% Other Services 3300 4% -1,183 -34% 2100 4% -229 -10% 1,840 3% -118 -20% Total 76790 100% 174 9% 51290 100% -1,503 -3% 52,010 3% -1,818 -10% Source: Business Directory, Statistics New Zealand

Hamilton Retail Review 47 In Tauranga as in Hamilton business services are supplemented by public sector services. Retailing remains an important component of CBD jobs there relative to Auckland, Wellington, and Christchurch (for which the analysis is based on 2010 data to pre-date the impact of the earthquakes). The public sector is a major employer in the five of the six cities. Public administration, education, and health and social services account for 31% of CBD employment in Hamilton, 33% in Tauranga, 32% in Christchurch, and 36% in Dunedin. The figures for Christchurch and Dunedin reflect the presence of major health or education facilities in the central city. In Wellington, the figures are dominated by central government employment: the education and health shares are relatively small. In Auckland, though, the public sector employment is just 15%, propped up by education at 8%. The inference is that as a city grows, the principle public service activities (education and health) tend to decentralise.

4.7.3 Separating Central City from City-Wide Changes One question is how far these shifts reflect trends distinctive to each city and how far they reflect central city restructuring across them all. To address this growth or decline in each sector in each central city area was projected from 2006 as it would have occurred if it had conformed to the city- wide trend. This “expected” employment change in each case can be compared with the growth that actually occurred. The difference (shown in the third column, “Actual-Expected”, for each city in Table 10) indicates how far growth (or decline) in the centre deviated from city-wide growth (or decline). This exercise demonstrates the relative performance of the CBD regardless of whether a given sector grew or declined, addressing what is distinctive in central employment change relative to each city as a whole. For example, there were 2,080 people in public administration jobs in Hamilton CBD in 2012. This was 580 fewer than if public administration employment in the CBD had grown at the rate experienced across the city as a whole (or 22% fewer than projected from a 2006 base). The worst performing sector in the Hamilton CBD relative to the rest of the city on these grounds was business administration and support, with a gap between actual and expected employment of 1,335 jobs, a 62% gap. This level of decentralisation is unmatched in any of the other cities. It was followed by retailing (-26%). Only education and utilities grew ahead of the rest of the city. The “underperformance” of the retail sector was less marked than business administration, with a job count in 2012 that was 1,062 lower than projected, a 29% gap. In addition, Hamilton’s CBD retail under-performance was matched by Auckland (-29%) and Hamilton (-29%). Interestingly, the gains in the Hamilton CBD in the professional and scientific services sector were matched by other parts of the city – the projected and actual figures were virtually identical. Only in Auckland was there evidence of structural shift favouring the CBD in these services.

Conclusion: Changing CBD Structure The analysis highlights structural decline in the Hamilton CBD over the last six years, evident to a greater or lesser extent in negative scores for 13 out of 17 sectors and total employment 17% less than might have been expected on the basis of city-wide performance. This “underperformance” is more pronounced than in the other cities considered, although not inconsistent with Dunedin and Tauranga, nor with Hamilton’s rapid growth (the population expanded by 9.9% from 2006 to 2012).

Retail Planning and Development in Hamilton 48 4.7.4 The Nature of Decentralisation The preceding analysis points to shifts in the economic structure of Hamilton, especially the CBD. These underlie the decentralisation of investment and the suburbanisation of population similar to the other cities of similar size. It is wrong to suggest that retailing is a cause of these processes and that curtailing its development elsewhere in the city will in some way restore the CBD’s former structure. This section considers how the decentralisation of business takes place. It might do so: (1) as activities in the CBD decline faster than they do elsewhere; or (2) as activities in the CBD decline while they grow elsewhere; or (3) as activities grow more slowly in the CBD than elsewhere. These shifts may occur as enterprises towards the end of their life- or product cycle contract to be eventually taken over, rationalised, or simply shut down, or as new competing enterprises established by local entrepreneurs or outside investors set up and grow more rapidly elsewhere. The relative decline of the Hamilton CBD has accelerated since 2007 across most sectors, with the contraction led by administrative and support services (Figure 10). It may be that under recent conditions of soft market demand or increased competition central sites are disadvantaged by the ageing nature of businesses located there – making them less adaptable– or by poor accessibility (with congestion offsetting centrality), higher costs and charges associated with older building stock and infrastructure, and rents based as much on historical precedent as site quality.

Figure 10 Charting Decentralisation from the CBD, 2006-2012

400

200

-200 Utilities

Logistics

Education

Hospitality

Retail Trade Retail

Construction

Other Services Other

Manufacturing

Admin. Services Admin.

Wholesale Trade Wholesale Financial Services Financial

-400 & Recreation Arts

Health & Social Care & Social Health

Public Administration Public

2006

Prof. & Scientific Services & Scientific Prof. Rental, Hiring, Real Estate Real Hiring, Rental,

-600 Information, Media, Telecoms Media, Information,

-800

-1,000 Actual Compared with Expected Shift in Jobs CBD Relative to Hamilton City Hamilton to Relative CBD Jobs in Shift Expected with Compared Actual -1,200

-1,400

Source: Based on Business Directory, Statistics New Zealand

Retail Planning and Development in Hamilton 49 Conclusion: Employment Decentralisation Employment trends suggest that traditional dominance of the labour market by the CBD has been a function of size: as cities grow the relative role of the CBD declines. As cities expand, so employment, particularly employment related to final (household, government and export) demand grows more rapidly outside the centre than in it. The distinctive geography of Wellington and Christchurch mean that this shift has been less pronounced in those cities but it is evident elsewhere among New Zealand cities and in Hamilton can large part can be construed a consequence of strong growth.

4.8 The Retail Sector in Hamilton This section examines shifts in retailing employment in more detail. The preceding section has demonstrated how retailing – along with a number of other sectors – has grown more rapidly (or declined more slowly) outside the city centre than inside it. Hence, Te Rapa increased its employment five-fold, albeit from a low base at the beginning of the decade (Figure 11). During the six years to 2006 retailing expanded rapidly across the city, although differential rates of growth reduced the dominance of the CBD. Hence, the city centre gained 420 jobs (up 14%) and Te Rapa 810 jobs (140%). Since then the growth in the centre has reversed, although the rate of decline was checked in 2012, while it has been sustained at Te Rapa and across the rest of the city (the suburban and neighbourhood centres).

Figure 11 Retail Employment Shifts, 2000-2012

Source: Business Directory, Statistics New Zealand Food and non-food stores have followed these trends although in the former the rest of the city has enjoyed steady growth. The decline of non-food stores in the city centre and the gains made by Te Rapa are more pronounced (Figure 12). Growth in non-food retailing has been modest elsewhere (Figure 13).

Retail Planning and Development in Hamilton 50 Suburban expansion has been driven by the food sector, reflecting supermarket development. Over 50% of supermarket and grocery employment is now outside the main centres (Table 13). This has been paralleled by the expansion of other food stores in suburban and neighbourhood centres. It is notable that specialty food retailing has declined in the city centre.

Figure 12 Food Retailing Employment Shifts, 2000-2012

Source: Business Directory, Statistics New Zealand Figure 13 Non-Food Retailing Employment Shifts, 2000-2012

Source: Business Directory, Statistics New Zealand Non-food retail stores tend to be more concentrated (Table 12). Only in the pharmaceutical and other (generally personal goods) stores was there significant growth outside the three main centres. Furniture stores also maintained a presence in suburban centres.

Retail Planning and Development in Hamilton 51 Table 11 Shifts in Food Retailing Employment, 2000-2012

2000-06 2006-12 2000-12 Shares 2012 Supermarket & Grocery No. % No. % No. % 2000 2006 2012 Employees City Centre 100 11% -280 -28% -180 -20% 56% 50% 36% 710 Central 0 n.a. 6 n.a. 6 n.a. 0% 0% 0% 6 Te Rapa 221 2456% 90 39% 311 3456% 11% 11% 6% 320 Chedworth/Chartwell 30 17% -90 -43% -60 -33% 1% 12% 16% 120 Rest of City 28 6% 249 52% 277 61% 28% 24% 37% 732 Total 380 24% -28 -1% 352 22% 96% 97% 97% 1,888 2000-06 2006-12 2000-12 Shares 2012 Specialised Food No. % No. % No. % 2000 2006 2012 Employees City Centre -15 -27% -10 -25% -25 -45% 17% 11% 8% 30 Central -30 -55% 15 60% -15 -27% 17% 7% 10% 40 Te Rapa 15 50% 10 22% 25 83% 16% 11% 9% 55 Chedworth/Chartwell -10 -20% -5 -13% -15 -30% 9% 13% 14% 35 Rest of City 75 60% 24 12% 99 79% 40% 57% 58% 225 Total 35 11% 34 10% 69 22% 100% 100% 100% 385 Source: Business Directory, Statistics New Zealand Table 12 Shifts in Non-Food Retailing by Category, 2000-2012

2000-06 2006-12 2000-12 Shares 2012 Furniture No. % No. % No. % 2000 2006 2012 Employees City Centre -40 -19% -85 -50% -125 -60% 48% 30% 25% 85 Central 10 6% -135 -79% -125 -78% 37% 30% 10% 35 Te Rapa 115 767% 10 8% 125 833% 3% 3% 3% 140 Chedworth/Chartwell 3 20% -9 -50% -6 -40% 3% 23% 41% 9 Rest of City 39 118% 1 1% 40 121% 8% 13% 21% 73 Total 127 29% -218 -39% -91 -21% 100% 100% 100% 342 Electrical & 2000-06 2006-12 2000-12 Shares 2012 Electronic No. % No. % No. % 2000 2006 2012 Employees City Centre 80 50% -60 -25% 20 13% 77% 71% 44% 180 Central 8 38% 52 179% 60 286% 10% 9% 20% 81 Te Rapa 37 1233% 80 200% 117 3900% 4% 3% 3% 120 Chedworth/Chartwell 0 0% 3 33% 3 33% 1% 12% 29% 12 Rest of City 3 20% -3 -17% 0 0% 7% 5% 4% 15 Total 128 62% 72 21% 200 96% 100% 100% 100% 408 Hardware, Garden, 2000-06 2006-12 2000-12 Shares 2012 Bldg & DIY No. % No. % No. % 2000 2006 2012 Employees City Centre 15 20% 10 11% 25 33% 15% 15% 14% 100 Central 46 20% -142 -52% -96 -42% 47% 45% 18% 130 Te Rapa 70 64% 210 117% 280 255% 1% 0% 0% 390 Chedworth/Chartwell -3 -100% 0 #DIV/0! -3 -100% 23% 29% 55% 0 Rest of City -1 -1% 15 22% 14 20% 14% 11% 12% 84 Total 127 26% 93 15% 220 45% 100% 100% 100% 704 2000-06 2006-12 2000-12 Shares 2012 Recreational Goods No. % No. % No. % 2000 2006 2012 Employees City Centre 10 6% -20 -11% -10 -6% 54% 44% 37% 170 Central 7 23% 18 49% 25 83% 9% 9% 12% 55 Te Rapa 30 60% 60 75% 90 180% 12% 11% 8% 140 Chedworth/Chartwell 5 13% -10 -22% -5 -13% 15% 19% 31% 35 Rest of City 42 127% -18 -24% 24 73% 10% 18% 12% 57 Total 94 28% 30 7% 124 37% 100% 100% 100% 457 Clothing & 2000-06 2006-12 2000-12 Shares 2012 Accessories No. % No. % No. % 2000 2006 2012 Employees City Centre 290 74% -250 -37% 40 10% 68% 67% 39% 430 Central 6 200% 14 156% 20 667% 1% 1% 2% 23 Te Rapa 77 2567% 270 338% 347 11567% 21% 17% 22% 350 Chedworth/Chartwell 50 42% 70 41% 120 100% 1% 8% 32% 240 Rest of City 11 18% -12 -17% -1 -2% 10% 7% 5% 59 Pharmaceticals & 2000-06 2006-12 2000-12 Shares 2012 Other Stores No. % No. % No. % 2000 2006 2012 Employees City Centre 10 3% -70 -21% -60 -19% 49% 43% 30% 260 Central 6 13% -20 -38% -14 -30% 7% 7% 4% 33 Te Rapa 37 206% 105 191% 142 789% 8% 12% 13% 160 Chedworth/Chartwell 40 80% 20 22% 60 120% 3% 7% 19% 110 Rest of City 30 14% 57 23% 87 41% 33% 32% 35% 301 Total 123 19% 92 12% 215 33% 100% 100% 100% 864 2000-06 2006-12 2000-12 Shares 2012 Department Stores No. % No. % No. % 2000 2006 2012 Employees City Centre -90 -20% -120 -32% -210 -46% 77% 50% 30% 250 Central 0 n.a. 90 n.a. 90 n.a. 0% 0% 11% 90 Te Rapa 105 111% 130 65% 235 247% 8% 5% 7% 330 Chedworth/Chartwell -5 -11% 15 38% 10 22% 16% 27% 40% 55 Rest of City 130 #DIV/0! -30 -23% 100 #DIV/0! 0% 18% 12% 100 Total 140 23% 85 11% 225 38% 100% 100% 100% 6 Source: Business Directory, Statistics New Zealand

Retail Planning and Development in Hamilton 52 The city centre dominates in four sectors: electrical and electronic goods, recreational goods, clothing and accessories, pharmaceutical and personal goods. Te Rapa dominates hardware, DIY, building and garden supplies, in large part reflecting the presence of LFR retailers, several on industrially zoned sites. Te Rapa is strong in the recreational goods and electrical and electronic goods. Chartwell expanded in all categories, particularly the clothing and accessories, hardware, gardening, building and do it yourself sectors. The greatest reduction in the city centre was in department store employment.

Table 13 shows the relative specialisation of centres and the suburbs. The central suburbs (Hamilton Lake, Maeroa, and Frankton Junction CAUs) have been separated from the balance of city centres.

The suburban centres are most specialised (or limited) in product range with heavy dependence on supermarket and grocery stores. Te Rapa appears least specialised, with a combination of large format retailing in industrial areas alongside the diverse offering at The Base.

Chartwell is specialised with its dependence on the clothing, footwear, and accessories. The city centre is marked by a relatively high share of supermarkets and grocery stores. Clothing, footwear and accessories are also important in the city centre, in surrounding suburbs and Te Rapa.

Table 13 Leading Sectors by Centre and Suburbs

City-Wide Supermarkets & Grocery Stores 28% Clothing, Footwear & Accessories 16% Pharmaceutical & Other Products 12% Top 3 Sectors 56% City Centre Supermarkets & Grocery Stores 32% Clothing, Footwear & Accessories 19% Pharmaceutical & Other Products 12% Top 3 Sectors 64% Central Suburbs Hardware, Gardening, Bldg., DIY Supplies 26% Clothing, Footwear & Accessories 18% Electrical & Electronic Goods 16% 61% Te Rapa Hardware, Gardening, Bldg., DIY Supplies 19% Clothing, Footwear & Accessories 17% Department Stores 16% Top 3 Sectors 53% Chedworth/Chartwell Clothing, Footwear & Accessories 39% Supermarkets & Grocery Stores 19% Pharmaceutical & Other Products 12% Top 3 Sectors 70% Rest of City Supermarkets & Grocery Stores 47% Pharmaceutical & Other Products 18% Specialised Food Stores 13% Top 3 Sectors 77%

Retail Planning and Development in Hamilton 53 4.8.1 Retail Employment Overview Analysis of employment changes within the retail sector indicate that the contraction of the CBD is taking place more or less across the board in both food and non-food retailing. The biggest losses took place in the grocery sector, furniture, and department stores. Clothing and accessories also contracted over the past six years following strong growth over the preceding six years. The major gains have taken place in the suburbs (rest of city) and Te Rapa. Chartwell has experienced steady growth in most categories, particularly in clothing and accessories.

Conclusion: Changing Retail Employment Distribution The big picture is one of decentralisation of convenience, personal, and discretionary goods. While retail in Te Rapa CAU has grown substantially, the growth has also taken place in suburban centres and Chartwell. Under these circumstances the changing structure of retail employment throughout Hamilton can be seen as a response to a growing tendency by consumers to shop in the suburbs, with Te Rapa (both large format stores and The Base) responding to this change in consumer behaviour.

4.9 Recent Trends in Retail Investment This section examines the distribution of retail building consents issued in Hamilton between 2000 and 2012 (calendar years) as a surrogate for retail investment generally. Figure 14 plots the value of consents for new buildings and alterations in the “retail outlet – shop, hairdresser, travel agent, real estate agent, TAB, showroom” category on the right hand axis. It plots the relative shares accounted for by the different areas on the left hand axis.

Figure 14 Value of Retail Building Consents, 2000-2012

Source: Statistics New Zealand

Retail Planning and Development in Hamilton 54 The two peaks in the value of development consented (2005 at $44m and 2010 at $37m) were driven mainly by developments in Te Rapa (with 41% and 78% of the totals respectively), in turn influenced by development of The Base and the Te Awa centre. There is evidence, however, of a recovery in the consents issued for the city centre since 2010, following a period of relatively subdued activity, and this looks set to drive the city’s total value, albeit from a low 2011 base. The value of consents for new buildings and alterations has been summarised for three four-year periods (Table 14). These confirm the concentration of investment in Te Rapa (accounting for 53% of the value of consents over the entire period) and the CBD (22%). The subdued central city investment in the middle of the decade is evident, with the value of expansion at Chartwell substantially exceeding it between 2005 and 2008. Not surprisingly, Te Rapa dominated new construction even more, accounting for 62% of the value of consents issued and 67% of the floorspace approved over the entire period; and 80% of value and 85% of area approved in the last four years (mainly reflecting development of Te Awa). It is significant, though, that the central city lifted its share of consents for new buildings and new floorspace consented over the last four years or so, however, shifting from the focus on alterations over the preceding four year period.

Table 14 Consents for New Buildings and Alterations, 2001 to 2012

Four Yearly Totals Shares 2001-2004 2005-08 2009-12 TOTAL 2001-2004 2005-08 2009-12 TOTAL All Consents ($m) Hamilton Central 24 13 18 55 38% 14% 19% 22% Te Rapa 31 36 67 134 49% 38% 71% 53% Chedworth/Chartwell 1 20 3 24 2% 21% 4% 10% Rest of City 7 25 6 38 11% 27% 6% 15% Total 64 94 95 252 100% 100% 100% 100% New ($m) Hamilton Central 14 1 11 26 31% 2% 16% 15% Te Rapa 28 27 55 110 62% 43% 80% 62% Chedworth/Chartwell 0 16 0 16 1% 25% 0% 9% Rest of City 3 19 3 25 7% 30% 4% 14% Total 45 64 69 177 100% 100% 100% 100% New Area m2) Hamilton Central 23,897 1,251 5,346 30,494 29% 2% 10% 15% Te Rapa 54,479 40,548 46,052 141,079 66% 56% 85% 67% Chedworth/Chartwell 185 8,071 15 8,271 0% 11% 0% 4% Rest of City 4,380 21,976 2,948 29,304 5% 31% 5% 14% Total 82,941 71,846 54,361 209,148 100% 100% 100% 100% Alterations Values($m) Hamilton Central 10 12 7 29 55% 40% 27% 39% Te Rapa 4 9 12 24 19% 29% 47% 32% Chedworth/Chartwell 1 4 3 8 5% 12% 13% 11% Rest of City 4 6 3 13 21% 19% 12% 17% Total 19 30 26 74 100% 100% 100% 100% Alterations Share of All Consents (by Value) Hamilton Central 43% 91% 39% 53% Te Rapa 12% 24% 18% 18% Chedworth/Chartwell 78% 19% 100% 33% Rest of City 57% 23% 52% 34% Total 30% 32% 27% 30% Source: Statistics New Zealand

Retail Planning and Development in Hamilton 55 Substantial differences across the city in the quality of new buildings for which consents have been issued are evident in differences between values (anticipated costs) per square metre of floorspace (Table 15). The orientation towards large footprint shops is reflected in much lower value per square metre in Te Rapa in particular. Chartwell was substantially expanded in the middle of the decade, while the recent upturn in consents for new construction in the central city suggests a positive response to the increased competition resulting. This was associated with a much higher value per square metre suggesting a different style of retail space and presumably different styles of retail activity occupying it – more intensive -- compared with Te Rapa and (to a lesser extent) Chartwell. Table 15 Value of New Retail Building Consents Issued, 2001-2012

Value/m2 ($) Value % CBD 2001-2004 2005-08 2009-12 2001-2004 2005-08 2009-12 Hamilton Central 576 927 2,063 100% 100% 100% Te Rapa 507 669 1,192 88% 72% 58% Chedworth/Chartwell 1,296 1,993 1,000 225% 215% 48% Rest of City 701 884 992 122% 95% 48% All Consents 539 888 1,267 94% 96% 61% Source: Statistics New Zealand

Conclusion: Distribution of Retail Investment Retailing has been undergoing a significant reconfiguration since the mid-2000s, heavily influenced by the expansion of capacity in Te Rapa CAU. This was accompanied by significant investment across the rest of the city including Chartwell. As investment in retailing in Te Rapa has eased, so it has been taken up by the CBD. The value of alterations and subsequently a commitment to new building indicate a significant upgrading of retail floorspace in the CBD. Some 5,000 m² of new floorspace was approved between 2008 and 2012. Among other things, this level of investment is likely to be reflected in a substantial gain in the quality of offering, diversity, and productivity of retailing there.

4.10 Changing Land and Capital Values The section is based on Quotable Value New Zealand (QVNZ) valuations aggregated by CAU and subsequently geographic sector Table 16.9 The valuation data includes areas of land and floor space allocated to individual uses, the capital value, and the land value component of capital value. All figures are in nominal dollars (i.e., not inflation adjusted), again because the emphasis is on comparisons between geographic sectors. For the current exercise two of the activity categories used by QVNZ have been aggregated to generate information for a broad mixed use- retailing category:

 CR Retail: Commercial Retail  CX Multiple/Other: Commercial Multiple/Other; this category incorporates properties that may comprise integrated shopping centres and malls. The inclusion of the CX category ensures the presence of integrated retail centres is included in the data, but may exaggerate the figures elsewhere where office uses are likely to be more important (especially the CBD). Within these limitations, the data enables us to review the distribution of retail floorspace by sector and how it is related to the distribution of residents across the city (Table 16).

9 The data file was provided by Property IQ, Wellington

Retail Planning and Development in Hamilton 56 Variations are clearly driven by the presence of regional centres. Floorspace per person is highest across the central part of the city, although falling over time, because of the substantial retail (and related) floorspace in and around the CBD. The ratio has become higher in the northern part of the city because of the presence and expansion of Chartwell and in particular the retailing that has developed in Te Rapa recently, a predominantly industrial CAU with few permanent residents. Table 16 Distribution of Retail-Mixed Floor Area and Population, 2000, 2006, and 2012

Residents Floor Area (sqm) Sqm/Person Sector 2001 2006 2012 2001 2006 2012 2001 2006 2012 Northeast 24,360 31,430 38,450 39,611 40,910 55,966 1.6 1.3 1.5 Te Rapa 300 230 390 23,922 69,387 140,659 79.7 301.7 360.7 Northwest 380 400 410 0 0 0 0.0 0.0 0.0 North City 25,040 32,060 39,250 63,533 110,297 196,625 2.5 3.4 5.0 West 28,630 29,970 31,720 29,869 30,632 30,092 1.0 1.0 0.9 Central Suburbs 8,980 9,520 9,790 34,993 36,486 43,029 3.9 3.8 4.4 Hamilton Central 2,190 2,820 3,200 463,395 462,183 449,754 211.6 163.9 140.5 East 22,030 22,980 24,110 32,207 52,177 39,765 1.5 2.3 1.6 Central City 61,830 65,290 68,820 560,464 581,478 562,640 9.1 8.9 8.2 Southeast 19,980 22,410 24,480 46,314 45,002 43,729 2.3 2.0 1.8 South 14,020 14,630 15,260 10,788 11,071 11,071 0.8 0.8 0.7 Southern City 34,000 37,040 39,740 57,102 56,073 54,800 1.7 1.5 1.4 Total 120,870 134,390 147,810 681,099 747,848 814,065 5.6 5.6 5.5 Source: QVNZ, Statistics New Zealand The figures for 2012 are summarised in Table 17. They confirm the dominance of the Central City CAU with 55% of total floorspace. Site occupancy also suggests that the Central City remains the most intensively developed retail area, followed by the Chedworth CAU, where Chartwell is located. Chedworth also recorded the highest level of improvements (building stock) relative to the value of land, with the CBD lagging both Chedworth and Te Rapa. This simply means that despite the intensity of development, the value of CBD building stock is relatively low – closer to the suburban stock which dominates the balance of the city than to the other major centres with their more recent investment. Table 17 Retail-Mixed Floorspace and Values, 2012

Coverage Values ($m) Improve- Floorspace Site Improve- ments: Area (ha) Capital Land (m2) Occupancy ments Land ($) Hamilton Central 449,754 34.3 131% 831 527 304 1.7 Te Rapa 140,659 36.7 38% 363 296 67 4.4 Chedworth/Chartwell 31,805 4.6 69% 172 158 14 11.2 Rest of City 191,847 92.2 21% 383 225 158 1.4 Whole City 814,065 167.9 48% 1,750 1,206 544 2.2

Shares Improve- Floorspace Capital Land ments Hamilton Central 55% 47% 44% 56% Te Rapa 17% 21% 25% 12% Chedworth/Chartwell 4% 10% 13% 3% Rest of City 24% 22% 19% 29% Total 100% 100% 100% 100% Source: QVNZ through Property IQ, accessed January 2013 Lower intensity is reflected in the city shares of retail investment: with 55% of floor area the central city contains only 44% of the value of improvements. With 17% of floorspace Te Rapa contains 25% of improvements while Chedworth contains 4% of floor area but 13% of improvements.

Retail Planning and Development in Hamilton 57 The QVNZ data comprises an annual snapshot which is revised every three years. There is generally a significant adjustment to values in the year following revision which reflects shifts that were not necessarily picked up through interpolation in the interim. This adjustment was particularly pronounced in 2007 after three years of rapidly increasing land values. Across the city as a whole, land values more than doubled, while the value of improvements grew by 44% so that capital values (land and buildings) increased by 61%. There was significant variation in this pattern across geographic sectors, however (Figure 15). While the central city experienced the greatest absolute increase in land value (given the scale of retailing there to begin with) it grew by just 96% to 2007, Te Rapa grew by 85%, Chartwell by 130%, and the rest of the city by 128%. Since then there has been even greater deviation across the city. Central city retail land values fell by 3% between 2007 and 2012 while Te Rapa “caught up” with a 75% gain, Chartwell values were virtually unchanged, while values across the rest of the city grew 13%.

Figure 15 Trends in the Value of Land and Improvements

Source: QVNZ The value of improvements in the CBD lifted by 49% from 2006 to 2007, a revaluation reflecting the several years of refurbishment and redevelopment evident in the building consent data. This lift stands out because of the dominance of the centre in the retail-mixed sector. Chedworth had a similar level of growth in the value of improvements, although from a much smaller base. Te Rapa land registered an upward adjustment of just 25%. By contrast development of The Base, additional large format stores elsewhere in the area, and subsequently Te Awa, have seen a fourfold increase in the value of improvements in the Te Rapa. This demonstrates among other things the attractiveness of more keenly priced suburban compared with CBD land for new retail investment, confirming the difficulty of achieving competitive returns on highly valued city land. The intensity of development remains low in the central city, despite apparently high levels of site occupancy (Table 17), when measured in terms of the value of improvements per hectare (Figure 16).

Retail Planning and Development in Hamilton 58 The intensity of development based on the latter appears greatest in Chartwell (denoted by the figures for Chedworth). The intensity of development in Te Rapa lifted well above the rest of the city through substantial investment towards the end of the decade. The fact that the city centre has lagged indicates the potential -- or the need -- for significant reinvestment there.

Figure 16 Relative Value by Sector, $ Improvements per Hectare

Conclusion: Retail Land and Capital Values The restructuring of Hamilton retailing is evident in shifting relativities in the value of land and buildings committed to retailing. Chedworth/Chartwell has retained a relatively high value of improvements, boosted by expansion and modernisation in the middle of the decade. Retailing in Te Rapa has picked up in scale, intensity and value through investment from the middle of the decade onwards. The city centre, despite apparently high levels of occupancy (which may be a reflection of the inclusion of non-retailing activity in the CX category) appears to have lagged in the investment and value stakes. However, it remains dominant in both land value and floorspace on the basis of scale, even allowing for the presence of non-retail activities in the classifications used.

4.11 The Impact of Location and Accessibility The relative performance of retail sites reflects attractiveness and accessibility to the market and proximity to other centres. These influences can be assessed through gravity modelling. Such models use centre size (GFA of retail space) as a proxy for attractiveness on the grounds that larger centres offer consumers more categories and more product choice within categories. However, patronage declines with distance as it increases the cost of accessing a centre. While gravity modelling has not been undertaken for this review, proximity to current and projected population has been assessed using a population-weighted measure of relative accessibility. This is based on the straight-line distance between each of sixteen regional, sub-regional and suburban

Retail Planning and Development in Hamilton 59 centres and the geographic centre of all CAUs within Hamilton (Figure 17). Where CAUs on the edge of the city include large rural areas the centroids have been based on the built-up area only.

Figure 17 Retail Centres and Census Area Units, Hamilton

Retail Planning and Development in Hamilton 60 The relative accessibility of each retail centre to the city’s projected population can be estimated by summing across all CAUs the population of each divided by its distance from the relevant centre. A high score (the sum of distance weighted CAU populations) denotes greater proximity to the city population (or a more accessible location) than a low score. For present purposes these weighted scores have been expressed as a percentage of the CBD score which, along with nearby Five Crossroads centre, is the most accessible point in the city (Figure 18).

Figure 18 Changing Market Accessibility, Sixteen Centres, 2011-2013

Based on the medium projections, the CBD remains the most accessible of the retail centres. Minimal change is projected in accessibility by 2031. The only significant gains are in growth cell centres and The Base as the northern population growth offsets their location towards or on the edge of the city. One reason for the continuing dominance of the CBD and the central band of long-established centres is that medium term growth is projected for growth cells to the north and south. While this may see more population at a greater distance from the CBD, it will also reinforce geometric centrality in what is predominantly a linear city on a strong north-south axis.

Conclusion: Accessibility of Centres This limited analysis indicates why the CBD is likely to remain the dominant centre in a range of household and consumer-oriented activities even as the city expands, provided its accessibility is not prejudiced by congestion. Nevertheless, the proposed suburban centres will come to play a significant role in responding to growing local demand, particularly to the extent that the populations they will be serving are generally further removed from the CBD than the majority of the existing population.

Retail Planning and Development in Hamilton 61 4.12 Conclusions The evidence across indicators – employment, building consents, and valuation data-- confirms that the city centre suffered a downturn since the mid-2000s, compounded by the onset of the Global Financial Crisis and its impact on economic growth generally. This has been most apparent in the city centre. Development in Te Rapa continued throughout the decade with strong commercial growth at The Base in the second half. Chartwell has maintained its position and value as an integrated centre, boosted by expansion in mid-decade. The balance of Hamilton has grown, supported by suburban investment in the middle of the decade with emphasis on food retailing.

Different rates of investment and consequent growth among the major centres have seen a shift in the balance of retail activity towards the north of the city. These shifts, though, do not necessarily support the proposition behind the PDP that the fortunes of the central city should be restored by limiting growth deemed competitive elsewhere. For a start, the north of the city has been the focus of population and employment growth throughout the period. The decentralisation that occurs as cities grow is in turn a trigger for investment in retail activity outside the central area.

Second, rapid and as it transpires unsustainable growth in consumption took place in the first part of the 2000s, followed by a significant slowdown in part as a response to a sharp global recession. A downturn whether manifest in higher costs or reduced demand is likely to impact most severely on the least productive or profitable businesses or sites of business. From a retail point of view these tend to be concentrated among older stores located in the central city, although this may be a precursor to cyclical reinvestment as central city values decline to a critical threshold.

This is true of non-retail sectors also, and is consistent with the poor employment performance in Hamilton and in the city centre in particular. The implication is that different parts of the city respond differently to changing economic conditions, depending on where each sits on its own investment and (in this case) retail product cycle.

Third, the review of other New Zealand urban centres suggests that Hamilton is the norm rather than an exception in terms of the diminishing role of retailing in the CBD.

The centre still dominates land values and the value of retail stock. This is consistent with its centrality. Given Hamilton’s urban form and the likely distribution of growth it will retain this centrality, although new development is may be located at increasing distances away. It is higher land values coupled with ageing sunk investment that differentiate between the city centre and the more rapidly growing centres. A policy of restricting growth elsewhere, though, may simply defer the point at which CBD redevelopment occurs by reducing the incentive to reinvest there and consequently preserving ageing and increasingly outmoded building stock. Imposing restrictions on development elsewhere may also reduce overall investment rather than redirect it, further dampening investment in the city as a whole.

Fortunately, it appears that the central city is now be progressing through a cycle whereby land values have eased to a level at which redevelopment can be justified. Building consent data indicate renewed investment, signalling a recovery in the CBD, presumably in response to declining values

Retail Planning and Development in Hamilton 62 and the impact of competition from elsewhere. The value of retail space recently consented is high, suggesting a different form of store and market positioning than in other centres.10

An appropriate planning response to slow retail growth or decline in the centre in cities like Hamilton may be to make it easier and more attractive to invest there rather than more difficult to invest elsewhere. As an example, the Council committed to an enhanced public domain in and around the CBD, lifting the quality of the central city environment in key precincts. It appears that this initiative is being more than matched, if not rewarded, by the recent recovery of private investment there.

At the same time population shifts, an enhanced arterial road network, and sustained investment in areas like Te Rapa and centres like The Base and Te Awa may stimulate consumer demand. The catchment evidence suggests that these developments increase the attraction of Hamilton to consumers from the wider region and do not simply compete for them with the centre. By arbitrarily restricting such investment and the associated income growth, the discretionary spending which helps to sustain the vitality of Hamilton and its CBD may be diminished.

Conclusion: The Changing Distribution of Retailing

What this review indicates is that retailing in Hamilton – as elsewhere – has simply been undergoing changes in function, form and, consequently, location. One consequence has been a shift in the distribution of capacity among retail centres, including decentralisation of capacity in keeping with trends in population, the consolidation of Chartwell as an important specialist retail centre in the city, the emergence of Te Rapa as a regional centre and a focus of shopping in the north of Hamilton, and the growing diversity of the CBD. One component of the last mentioned comprises the ongoing changes influencing retailing, marked by the recent step up in and consolidation of investment there..

Neither medium term not recent trends in retail investment in Hamilton support or justify policies that might restrict its development. While it is not clear what the future holds for retailing generally, there are no firm grounds for regulating to sustain (or restore) a hierarchy which is little more than an abstract and arbitrary construct. Certainly, the recovery of CBD retailing underway does not depend on limiting it elsewhere and policies to do so could diminish retail investment across the board.

10 Since this report was prepared Bayley’s Real Estate (2013) has published a survey identifying “a string of new development schemes, property upgrades and redevelopments [that] have centred attention back on Hamilton’s CBD …” This includes 9,000m2 of office space to be completed in 2013 and the prospect that the $40m upgrade of Centre Place will see “the CBD retail sector … ultimately take the shape of a compact core area””. Despite this putting pressure on secondary strip shopping within the CBD, retail vacancy rates in the centre are reported to have fallen from 19% in June 2010 to 12.5% in January 2013.

Retail Planning and Development in Hamilton 63 5 Projecting Retail Demand

The review has focused to this point on retail supply, although informed by the Speer and Starr projections that led to their conclusion (and reiterated by Property Economics) that the city as a whole has adequate capacity in place or planned to cater for demand for twenty years or so. This section reviews the existing projections of demand and assesses them against an independent projection prepared for the review. It also considers the assumptions underlying the projections and the contingencies associated with them to provide a range of expected additional retail land needed.

5.1 Estimating Future Retail Demand Retail demand is measured directly through surveys of spending, privately at the independent retail centre level, publicly by Statistics New Zealand at regional and national level, and indirectly through the Household Expenditure Survey (HES). The HES is used to estimate spending by retail category by area of residence (aggregated by CAU) by applying national or regional spending profiles to regional or local household numbers (Figure 19)). Aggregated across CAUs these provide grounds for estimating total expenditure growth in Hamilton by area of residence (CAU, suburb, or sector). Projections in demand are made by applying average annual spending estimates (by category) to five yearly cohort-based projections of household numbers. These are generated at CAU level by Statistics New Zealand using estimates of birth, death, net migration, and household occupancy rates. When allocating spending estimates to different centres to determine how much floorspace is needed in different parts of the city, provision has to be made of the distribution of spending across centres according to what they offer (“attractiveness”) and how far they are from the place of residence relative to the costs and time associated with travelling further to meet needs (“distance decay”).

Figure 19 Estimating Retail Demand Using the Household Expenditure Survey .

Retail Planning and Development in Hamilton 64 Spending that takes place beyond the centre nearest to the place of residence is considered to be “leakage” from the former centre and “capture” by the centre or centres at which it takes place. “Net leakage” is a single measure of performance for which a negative value implies a loss of local sales and a positive value a gain of non-local sales. Adjustments may also be made to take account of work-based and visitor (tourists, travellers) spending in a given centre or area. Ideally, estimates of net leakage are derived through the application of gravity models based on (1) the greater probability of a household spending at a nearby than more distance centre; and, (2) the greater probability of a household spending at a large rather than small centre (with size measured as retail floorspace generally taken as a proxy for attractiveness). By allocating shares of expenditure from individual CAUs to each retail centre, the gravity model derives generally reasonable estimates of the centres’ individual turnover figures. No gravity modelling appears to have been undertaken to assess the potential scale of new centres or the impact of changes in retail demand and supply on existing centres for Hamilton. Instead, policies likely to influence where investment might take place rely on city-wide projections of expenditure and its consequences for total supply. However, gravity modelling is beyond the scope of this review.

5.2 Current Estimates of Hamilton Retail Spending Speer and Starr (2009) and subsequently Property Economics (2010) produced different estimates of current and future spending in Hamilton and consequent floorspace requirements. To help review these and update future retail demand an analysis was undertaken based on the following steps: 1. Household retail spending profiles were derived from the 2010 HES. The national profile was scaled up 5% across all categories based on a comparison of Hamilton with national incomes in the 2006 Census and in subsequent annual household income surveys; 2. These profiles were used to estimate current expenditure based on the SNZ estimate of the number of households in Hamilton 2011, and projected through to 2031 in 2010 dollars using the SNZ medium household growth scenario; 3. Workplace spending was based on an estimate of annual spending per employee by Property Economics of $6,640 (2010, p.71) and projected employment. Property Economics projected employment through to 2021 as a share of the projected population (the participation rate). A similar approach was adopted for this study using the SNZ 2012 revision of demographic projections. A recent decline in the Hamilton participation rate (from around 55% to 50%) was assumed to halt and recover to 53% over the projection period. This figure and an assumed constant spend per employee were applied to SNZ medium population projections to project work-place-based spending. This resulted in an estimate of 34% of spending in the city associated with employment activity. 4. Provision was made for a 20% gain (net leakage) from cross-border shopping (sales to out-of- town customers less purchase elsewhere by Hamilton residents). This was based on the number plate survey at key centres undertaken by Speer and Starr, and is consistent with the shares of spending derived from outside Hamilton according to the Marketview (2013) survey. . 5. The resulting estimates of retail expenditure in the city were converted to floor space demand by the application of coefficients of sales per square metre derived from various studies.

Retail Planning and Development in Hamilton 65 The variable quality and arbitrary nature of the underlying data and assumptions mean that analyses of spending are pitched at a very general level and can lead to quite different results. Hence, differences are evident in total spending, floorspace, and consequently sales/m2 across the three studies (Table 18). Nevertheless, the figures (based on 2010 dollars) are all relatively low. For example, the NZPC Centres Directory contains floorspace and sales figures for 37 centres which suggest average and median productivity figures in 2012 of $6,100/m2. These centres tend to be relatively strong performers, however. For present purposes and covering the full spectrum of store types $4,200/m2 is adopted here as the indicative figure for the base floorspace projections. Table 18 Estimates of Retail Spending and Floorspace in Hamilton

Floor Area Estimate Spend Estimate $/m2 Source GFA Source $m Property Economics 2010 463,700 Property Economics 1,833 4,000 Property Economics 2011 463,700 This Report, 2011 1,831 3,900 Speer & Starr 2008, Subregion * 448,700 Speer & Starr (2011 Est.) 1,432 3,200 Speer & Starr 2008 Hamilton 448,700 This Report, 2006 1,727 3,800 QV 2012 522,400 This Report, 2011 1,831 3,500 To assess future demand Speer and Starr and Property Economics assumed spending per household increases at 1% per year. Comparing the 2007 and 2010 HERS results shows that in real terms ($2007) retail spending per household fell. On the assumption that the GFC has led to a permanent shift in the balance between savings, services, and retail spending, no allowance has been made for real growth in household incomes (and, by inference, spending) in the current projections. Nevertheless, increasing the number of households (based on SNZ 2010 medium projections) boosts growth from 1.2%/yr between 2006 and 2011) to a 1.8% through to 2016 before falling (Figure 20).

Figure 20 Retail Spending in Hamilton - Projected Annual Compound Growth Rate

Projecting medium growth in household numbers, no change in household spending, and continuing low sales productivity ($4,200/m2), leads to a need for close to 137,000m2 of new retail floorspace by 2031, 72,000m2 in the first ten years (Table 19). Gains in productivity should lower that to perhaps 95,700m2 over the twenty years period based on average turnover of $6,000/m2. 11

11 The irony is that successful competition by CBD retailers is unlikely to lead to significantly increased demand for retail floorspace there because of the productivity gains that result.

Retail Planning and Development in Hamilton 66 Table 19 Projected Demand for Additional Retail Floor Space, 2011-2031

Estimate Projected Change 2011 2016 2021 2026 2031 2011-21 2021-31 2011-31 Medium Household Projection Households 53,600 58,000 62,500 67,200 72,100 8,900 9,600 18,500 Spending ($000) Subtotal Households 1,033,700 1,118,600 1,205,400 1,296,000 1,390,500 171,600 185,100 356,700 Subtotal Workplace 492,200 549,100 571,700 593,600 613,500 79,500 41,800 121,300 Total (Includes 20% sales ex-Hamiton) 1,831,000 2,001,200 2,132,600 2,267,500 2,404,800 301,600 272,200 573,800 Floorspace (m2) Moderate Productivity ($4,200/m2) 435,900 476,500 507,800 539,900 572,600 71,900 64,800 136,700 High Productivity ($6,000/m2) 305,200 333,500 355,400 378,100 400,900 50,200 45,500 95,700

High Household Projection Households 54,700 60,400 66,500 73,200 80,300 11,800 13,800 25,600 Spending ($000) Subtotal Households 1,054,900 1,164,900 1,282,500 1,411,700 1,548,700 227,600 266,100 493,700 Subtotal Workplace 492,200 566,400 600,900 636,100 670,600 108,700 69,700 178,400 Total (Included 20% gain from outside city) 1,856,500 2,077,400 2,260,100 2,457,400 2,663,000 403,600 402,900 806,500 Floorspace (m2) Moderate Productivity ($4,200/m2) 442,000 494,600 538,100 585,100 634,000 96,000 96,100 192,000 High Productivity ($6,000/m2) 309,500 346,300 376,800 409,600 443,900 67,300 67,100 134,400 If the higher SNZ household projections were to prevail, the floorspace required would be greater, at between 134,00m2 (assuming growth is achieved in part by higher sales per unit floor space), and as much as 192,000m2 (if the current level of around $4,200/m2 prevails - an unlikely outcome),

5.3 Land Requirements Floorspace projections are converted into estimates of land needed by making assumptions about site coverage – a measure of the intensity of land use. Again, these will vary by retail category; large format stores generally absorb more land for parking and landscaping purposes per unit of sales than a mall with specialty shops. However, integrated LFR (in a bulky goods centre for example) should reduce the demand for land compared with stand-alone sites. Neighbourhood shops rely on on-street or limited off-street parking and so generally achieve high coverage of small sites. For present purposes an average development yield of 70% is assumed. This allows that 30% of a development or commercial subdivision will be absorbed by roads, services, and public amenities. Building site coverage (or footprint) within such a development is then assumed to be 50% to allow for parking, access ways, landscaping, and utility services. Jointly these ratios suggest a 35% net yield (building footprint) across a development. If development is more intensive (through, for example, less provision for reserves, narrower road corridors, or a higher ratio of built area to site area), the amount of land required to achieve a given level of retail sales will be reduced. This may be consistent with urban consolidation objectives, although increasing intensity may exacerbate environmental externalities. For present purposes a moderate yield for a given area of land is considered the most likely. The results of achieving a higher net yield (of 42% based on 60% site coverage) have been estimated also. When applied to the floorspace demand assuming constant productivity ($4,200/m2, Table 19), the lower yield figure generates an estimate of retail land required to meet current demand of around 125ha (Table 20), with an additional 21ha required through to 2021 and 19ha in the following ten years, for an increment of 40ha required by 2031, for a total of 165ha. If sales per square metre reach $6,000, only 27ha of additional land is required (and this falls further to 23ha if a greater

Retail Planning and Development in Hamilton 67 intensity of site use yields 42% coverage). These figures compare with Property Economics’ single estimate of 35ha (p.26). If high population growth is achieved, together with productivity gains in retailing, then the land required at 35% site coverage would be 38ha according to this simulation, but just 32ha if accompanied by an increase in occupancy from 35% to 42%. Table 20 Estimating Land Area Requirements

Estimate Projected Change 2011 2016 2021 2026 2031 2011-21 2021-31 Medium Household Projection Low Productivity ($4,200/sqm) Moderate Yield (35% Coverage) 125 136 145 154 164 21 19 High Yield (42% Coverage) 104 113 121 129 136 17 15 High Productivity ($6,000/sqm) Moderate Yield (35% Coverage) 87 95 102 108 115 14 13 High Yield (42% Coverage) 73 79 85 90 95 12 11 High Household Projection Low Productivity ($4,200/sqm) Moderate Yield (35% Coverage) 126 141 154 167 181 27 27 High Yield (42% Coverage) 105 118 128 139 151 23 23 High Productivity ($6,000/sqm) Moderate Yield (35% Coverage) 88 99 108 117 127 19 19 High Yield (42% Coverage) 74 82 90 98 106 16 16 The simulation and projection exercise described generates several findings:  The Property Economics estimate of another 35ha of land required over and above what is already occupied remains broadly correct. A less definitive provision might be for between 30ha and 40ha to ensure no shortfall arises.  There is a wide range of variables that can impinge on the final outcome – population and household growth, changes in consumption and spending patterns, gains in floorspace productivity, and variations in site yield.  The inference that around 125ha is currently occupied and that at the most another 40ha would be required for retailing over the next twenty years (and most likely under that) suggests that the provisions made in the Operative District plan remain adequate, and the additional land available as a result of the Proposed District plan is likely to prove more than enough (Table 3).

5.4 Conclusions Three different projections using broadly the same approach but varying assumptions support the conclusion that the outlook for additional retail land demand is modest and falls comfortably within the provisions included for new suburban centres in the PDP, available capacity at The Base, and commercial land around the CBD.

Conclusion: Projecting Retail Demand There is more than enough new retail capacity provided for in the PDP (and in the Operative District Plan). New development and redevelopment will lift retail sales productivity, further limiting the demand for additional retail land. Indeed, given the likely attraction of new suburban centres developed in association with the planned growth cells, it is difficult to see the additional land brought into the central city commercial zone being required, particularly as the recent commitment to reinvestment there is more likely to consolidate than disperse retailing in the CBD.

Retail Planning and Development in Hamilton 68 6 Future Possibilities

The analyses presented in this report reflect recent development and projected demand based on our understanding of current consumer behaviour and retail supply. This section explores the prospects for significant changes in the drivers of demand and supply and their possible impact on the need for new retail floorspace. Through this it contrasts uncertainty about the future shape of retailing with the commitment to increase control over investment in the sector evident in the policies in the PDP.

6.1 Planning to Regulate Retail Investment The PDP sets out objectives and policies favouring the development of commercial activity within existing centres and promoting the primacy of the central city within a more or less fixed hierarchy of centres, in part by regulating the expansion of retailing elsewhere. The PDP includes policies to limit the scale and scope of commerce (across seven different zones) outside the central city by expanding the capacity of the central city to accommodate commercial activity by increasing the area over which it can take place and imposing a higher level of regulation on centres elsewhere.

6.1.1 A return to mono-centric cities? These policies reflect the idea that hierarchical relationships should determine the development of different centres. This approach is not without precedent as many jurisdictions have sought to re- establish a semblance of monocentric city form (where land use is influenced by distance from a dominant centre, the location of which is traditionally the most accessible point). Yet, monocentricity is historically specific (as is the central place theory that informs it) and difficult to sustain as cities expand spatially beyond certain thresholds, as changes in transport networks and the emergence of congestion undermine central-place advantages, and as patterns of consumption change. As cities have grown many employment and consumer activities have decentralised including retailing in response. This has been facilitated by the growth of private mobility through the falling capital and operating costs of car travel. One policy response is to ensure the quality and efficiency of connections among different parts of the city, rather than maintaining the view that higher order shops and services will continue to be delivered from a single facility located at the city centre.

6.1.2 Growing incomes and increasing suburbanisation A corollary of growing real incomes and increasing mobility has been an increase in discretionary expenditure. This has in turn supported the expansion of retailing and other consumer services post- World War II, facilitated since the 1960s by the availability of low cost sites close to consumers in rapidly expanding suburban and even city edge localities, and by a reduction in the economies of scale and specialisation that have in the past characterised high order goods and services. At the same time, the movement by bulk retailing and department stores out of central areas appears to be a response to the higher rentals and increased congestion of city centres in the large, suburbanised cities of the late 20th century. It makes little economic sense for the large format stores that have taken up an increasing share of sales across most categories to locate in the central

Retail Planning and Development in Hamilton 69 city. Consequently the evolution of this form of retailing, which has prospered over the past 20 to 30 years, has generally favoured suburban ahead of CBD locations.

6.1.3 The Push to Intensification More recently there has been growing concern over the sustainability of private mobility as real fuel prices promise to rise and urbanisation is implicated in growing resource consumption. This concern has been used to justify policies based on urban design principles that aim to lift the density of cities and restore the primacy of city centres. The rationale is that higher density cities are more environmentally sustainable and that increasing city density relies on strengthening the role of the city centre. By restoring central city primacy and implementing public transport to support this, it is anticipated that people will substitute enhanced accessibility (increasingly via public transport) to a dominant centre for the current (predominantly private) mobility that sustains sub-regional and suburban centres and out-of-centre retailing. The anticipated outcome is a more constrained city footprint, reversing the current tendency for activity (housing and employment) to disperse as cities expand and incomes increase. The analysis of retail trends in Hamilton (Section 4.8) demonstrates just such a tendency. In addressing the appropriateness of policies aimed at curtailing or moderating decentralisation the balance of this section considers, first, international experience with retail decentralisation and methods to regulate the evolution of centres within cities; and, second, possible changes in the retail sector which might influence the outcomes of such policies in the future. It discusses in particular the emergence of large format and bulky goods stores to demonstrate a need for planning that can respond to new – and potentially game-changing – retail developments.

6.2 Planning to Restore the Central City

6.2.1 Decentralisation Early retail decentralisation was marked by the emergence of suburban malls in the 1950s, ‘60s, and ‘70s, and sustained by the development of large regional retail centres and new store formats in the 1980s and 1990s see, for example, Schiller, 1998, 1994). The integrated retail environment these created has persisted over the past five decades through new centre development based on ever more sophisticated design principles, and the regular expansion and refurbishment of older centres. Large format stores and bulky goods precincts located outside traditional centres and malls have sustained further decentralisation. This has been accompanied by a growing overlap between trade custom and sales to final demand in what were once building supply operations and in some categories (such as furniture) increasing direct sales to the public by producers. These tendencies have been reinforced by changes in consumption behaviour and increased private car use providing opportunities for multi-purpose trips, bulk shopping (including supermarket shopping), and comparison shopping between as well as within centres. The refurbishment and diversification of older centres and strip shops has taken place at much the same time as lower rents and redevelopment have encouraged an increasingly diverse range of activities into traditional retail precincts (including city centres). This is especially the case in areas subject to repopulation through gentrification and intensification.

Retail Planning and Development in Hamilton 70 Nevertheless, differences in relative growth rates and, in many cases, an absolute decline in traditional centres have not simply been driven by changes in the nature of retailing capacity. They have been supported by changes in shopping behaviour. A report into the future of town centres in Southeast England concluded that changes since the 1980s were based “on the arrival of a much more mobile and discerning consumer seeking not just value for money, but also increased choice in terms of goods, shopping and leisure environments and experiences”. This means that “shopping locations have to be able to fulfil the role of a destination location. This means providing a wide range of shopping and leisure facilities able to attract and retain the interest of the entire family” (DTZ Pieda Consulting (2004). The authors concluded that traditional town centres needed to respond to these developments through refurbishment to counter the mixed activities and diverse consumer services offered by newer centres. A 2007 Scottish study concluded that retailing was “one of the most dynamic and rapidly changing sectors within the national economy” with change “a continuous feature since the mid-1960s”. It identified the following changes over the preceding decade:  A fall in total number of shops;  More large food and non-food superstores;  New regional shopping centres;  Growth of retail sales and floorspace;  Increase in small store formats;  Increased non-local ownership;  Market concentration of sales in fewer, larger stores and locations;  Extension of products and services in superstores (food and non-food);  Larger retailers taking control of the supply chain;  Use of technology to control costs, develop new markets and formats, and promote customer loyalty;  Loss of independent grocery stores and growth in the market share of multiple supermarkets;  The rapid growth of internet based retailing.

These structural changes drove a move from traditional centres and smaller stores, contributing to decentralisation. But they are seen not so much as a rejection of older centres as a response to changing consumer demand, supply chain innovations, regulatory matters, and more use of cars. Long opening hours and pleasant, designer environments in newer centres, including more effective climate control, extensive parking, enhanced security, and absence of congestion provide distinct advantages over the “deteriorating shopping environments” of older centres. Similar trends were noted in America in the Urban Land Institute retail development handbook (Kramer et.al., 2008; pp34-39). Moreover, slower new centre construction the 1990s also saw a lot of refurbishment, lifting the quality and increasing the floorspace of existing suburban and subregional centres. In some places this created entertainment and recreation formats, increasing their market penetration in the suburbs. Power centres – often on the city edge – catered for the new large format stores. Industry ownership continued to consolidate as malls were redeveloped, often boosted by infill residential

Retail Planning and Development in Hamilton 71 development. Continuing redevelopment, repositioning and specialisation were seen as key initiatives that existing centres could take in the face of changing consumer demands. The implication of the international literature is that penalising or limiting investment in new centres reduces consumer choice and satisfaction while undermining the quality of retail investment, either diminishing productivity or reducing investment in the sector (Jackson and Watson (2010). Conclusion: Regulating Decentralisation Retail decentralisation has been endemic in the recent past, and has been driven by fundamental changes in the nature of supply (greater scale, integration, and efficiencies) and demand (increased consumption, the exercise of choice based on product and service differentiation, and greater mobility). The question is whether these changes could have been planned for or in some way regulated through statutory plans rather than simply provided for, and whether by hindsight seeking to limit them would have been justified. In the event, these changes underpinned considerable planning conflict with their unanticipated demands on land use and transport.

6.2.2 Large Format Retailing This section outlines the nature and impact of the large format sector as an example of the sort of structural change that has reshaped retailing over the last twenty years. Large format stores have been an important driver of the move from city centres where high rents, expensive parking, traffic congestion, small sites, and fragmented ownership prejudice their functionality and viability. There have been three locational responses to these conditions, each contributing in a different way to the decentralisation of retailing. The first is for large format supermarkets, discount stores, and department stores to locate on the edge of integrated shopping malls, or as anchors within them (especially in the case of supermarkets). The second is the ad hoc location of individual large format stores on a stand-alone basis in retail, mixed use, or industrial zones. The third is the creation of power or bulky goods centres (on the edge or even out of town) where a number of large format stores co-locate, sharing access and egress, parking, services, and goods handing areas. This arrangement is favoured by stores selling bulky goods or yard-based retailing – hardware, gardening, and building supplies; furniture and soft furnishings, appliances, recreational equipment, and the like, categories calling for large display areas and easy access for handling and pick-up purposes. The development of large format stores has been a response to a number of changes in production and distribution technology and reflecting the impact of the liberalisation of trade and investment globally, leading to a fall in the real price of consumer goods. The resulting changes in retailing include reduced local ownership and the emergence of national and international store brands; increased control of the supply chain by retailers through bulk purchase of mass-produced consumer goods from fewer producers; advances in logistics making supply and distribution chains more efficient; more intensive use of technology to control inventory and maintain customer loyalty; and, most recently, the emergence of internet based retailing. In Europe, the trends towards large scale retailing supported by these changes culminated in the superstore which internalises a range of retail categories (Hargest and Wallace Planning, 2007). Large format and bulky good stores generally require extensive, competitively priced sites, typically with unit occupancy costs well below traditional town centre or malls. This need is compounded by

Retail Planning and Development in Hamilton 72 the requirement for extensive parking capacity to take advantage of comparison shopping and handling efficiencies. Such requirements usually call for a change of approach to planning to accommodate these demands, includes providing for their co-location. The Bulky Goods Retailers Association in Australia proposed the following planning requirements:

 A large, flat site to accommodate, parking, customer and delivery access, and landscaping;  Exposure to passing traffic on a major road or with good access to the arterial network;  Affordable rents that allow retail space sufficient to display and store large items;  Site and building design to safely accommodates delivery by large commercial vehicles and loading of bulky goods by customers;  The capacity to safely accommodate up to 40 trucks and semi-trailers per retailer per day;  A customer car parking ratio of at least 3 spaces per 100 square metres of floor space;  A location that can service a regional catchment of over 100,000 residents;  Co-location with other bulky goods retailers. (http://www.bulkygoodsretailers.com.au/planningReq.php) The Association suggests that bulky goods retailing is better at the edge of existing centres or outside them, clustered on land zoned for large format, single level buildings (Kelly 2004). In a 2008 overview Lee identified that in New Zealand:

 Since 1999 the growth rate of sales in bulky goods had been well ahead of the growth rate for total retail sales;  Within bulky goods retailing, the most rapid recent growth had been in audio-visual and data processing (electronics and computers), which was then the biggest single category in terms of expenditure, followed by furnishings and floor covering and household appliances;  Since 1996 bulky goods prices had declined by 20% (led by the electronics sub-category) while the CPI has increased by 30%, demonstrating strong productivity gains;  75% of bulky goods stores were in centres rather than on freestanding sites;  42% of these stores were in centres of between 10,000m2 and 20,000m2, 31% in centres between 20,000m2 and 30,000m2 and 27% were in centres of over 30,000m2.  Recent developments (between 20005 and 2007) had favoured larger centres. It was suggested that such developments and the productivity benefits they offer had been reduced by New Zealand planning and building regulations, manifest in relatively high construction costs and lack of suitable land (Palmer, 2008).

Conclusion: Large Format Retailing Large format retailing has transformed the sector over the past two decades, contributing to decentralisation. It brings with it distinctive planning and site needs that have had to be addressed in district plans. It offers considerable productivity advantages which will translate, among other things, into potentially fewer shopping trips and fewer multi-destination trips, while at the same time catering for increasing levels of consumption of durable goods. The advantages are likely to be maximised by co-location of multiple LFR stores and, ideally integration or alignment with suburban shopping and regional centres and malls.

6.3 The Counter-Movement – International Experience Resistance to out-of-centre retail growth has emerged as part of the movement to revitalise central cities In light of the decentralising force described above.

Retail Planning and Development in Hamilton 73 However, there is evidence of increasing acceptance of the entrenched nature of suburbanisation. A Property Australia (2008) paper for example confirmed the entrenchment of decentralisation with much recent investment, for example, committed to refurbishing large suburban centres rather than city centres. It suggested that the answer was not to discourage decentralisation, but to take a more active approach to rehabilitating old centres. The paper argued that ageing facades and a deteriorating built environment call for reinvestment to retain property values and respond to out-of-centre competition. The push for reinvestment is also influenced by increasing inner city living. The potentially higher disposable incomes of new inner city residents were seen as stimulating CBD diversification. This could be most readily achieved through refurbishing existing buildings and precincts. This would, in turn, limit the forms and scale of retailing that might be accommodated, leading to a distinctive inner city mix, although there may be occasional opportunities for comprehensive “brownfield” mixed use redevelopment in or near the CBD. Davies (2004) in an international review made the point that land-use policies limiting retailing outside existing centres are simply one of a number of ways that governments intervene in retailing. Others include setting statutory trading hours, controlling what can be sold for safety and health reasons, and price controls. The reasons for regulating retail land are thus associated with non-spatial matters that sit outside the bounds of planning. In particular, there is a history of regulation that is anti-competitive in nature, aimed at managing the impact of entry to national or regional markets by large, powerful, corporate brands which are likely to undermine smaller local businesses. Regulation may also be associated with protecting the price structure and profitability of existing retail interests. Hence, rules that might prevent retail investors and operators from accessing relatively low-cost sites where parking and service charges might be minimised can similarly be seen as protecting existing business interests. Davies identifies that Western European countries in particular imposed significant restraints on where and at what scale retailing can locate with the aim of regenerating inner city retail precincts, although notes that they have since reduced such regulation. In the United Kingdom legislation directly supports regeneration of older centres, including the designation of Business Improvement Districts (BID), rather than limiting the development of competing areas. Exclusionary land use mechanisms were used in Japan as a result of political pressure by the large independent retail sector which is made up of mainly small stores. However, they have since been relaxed, allowing a greater diversity of operators, including international chains, into the market. Canada has similarly moved from a restrictive to more liberal policy. Plans in Toronto, for example, no longer refer to retailing or the old hierarchy of shopping centres at all. Instead retailing “has become subsumed into another of number of other general land use categories…: Neighbourhoods…, Mixed-use areas…, Employment areas…, Avenues…, and centres. Retailing as a specific policy area has effectively been abandoned” (p.87). In his conclusion, Davies suggests, first, that retail planning policies fundamentally reflect a concern over the impact of large retail investment companies on small businesses. Tackling this through land use rules is likely to be inappropriate and ineffective. Second, there is a common concern that major shopping centres can, through out-of-town development, cause deterioration in traditional town

Retail Planning and Development in Hamilton 74 and city centres. Third, there is a question of how far competition might be allowed between large and small companies and out-of-town and in-town development. Underlying these conflicts, though, is the issue of where consumer preferences lie. While not studied extensively these tend to be reflected in catchment surveys and the patronage of different centres which generally testify to the popularity of major retail centres outside the city centre. That is not to say that retailing has no future in the city centre. The loss of large format stores – primarily ageing department stores – can create opportunities for new, more intensive land uses and reuse of heritage and character buildings. The renewal of “tired” precincts can create “vibrant” entertainment quarters (Courtney place in Wellington), quirky, specialised retailing and catering (Cuba Mall, Wellington, Ponsonby and Britomart in Auckland), specialised niche precincts (Chancery in Auckland), and the creation of small format retail in central city “malls” (arcades, reused buildings). The relatively small size of the new generation of stores and eating places is a distinctive feature of this inner city revival. And, as inner city living gathers pace it is accompanied by the return of personal goods and grocery outlets to the CBD, including medium-sized supermarkets.

Conclusion: Responding to Decentralisation Internationally the entrenched nature of decentralisation appears to be acknowledged and accepted. Consequently, the policy stance has shifted from regulating to prevent growth outside city centres towards largely non-statutory measures to promote and support redevelopment and diversification. These include urban design initiatives and supporting emerging collaborative institutions that can coordinate otherwise fragmented investors and operators as they respond to the challenges and opportunities of structural change.

6.4 Options for Hamilton It is worth considering how far these issues of decentralisation and inner city revival may underlie planning for Hamilton. In particular, how far might the policies advanced in the PDP be construed as anti-competitive, favouring the interests of one set of investors, or investments, over another? Even if the objective of the centres policy in the PDP derives from resource management issues associated with, say, traffic flows, intensification of land use, or a commitment to integrated planning (focusing on the centre to support a goal of urban containment or intensification), questions remain over how they impact on the capacity to invest in Hamilton generally, and whether they might be invoked to support anti-competitive behaviour. Consequently it can be asked whether alternative methods of achieving the resource management objectives less open to competitive manipulation have been adequately considered. If it is inappropriate to arbitrarily limit or control what might happen in second and third tier centres to protect the CBD, what are the alternatives? The use of Business Improvement Districts (BID) or Town Centre Management (TCM) schemes offers one method used internationally to support traditional centres in need of regeneration. They enable the integrated planning, marketing, and management associated with large, modern retail centres to be applied in the older, more fragmented centres of multiple landlords and small and medium businesses associated with traditional town centre retailing.

Retail Planning and Development in Hamilton 75 BIDs create a collective level of governance that provides for coordinated redevelopment across the public and private domains, including expenditure on streetscapes, security, public amenities, marketing and the like. They are funded usually by a levy which may take the form of a special council rate over the area of benefit. They are a means by which smaller, specialised and niche retail and service businesses can coordinate their planning, presentation, and promotions in an increasingly diverse inner city environment. Because they are essentially self-funded and sit outside the statutory planning context BIDs do not invoke regulatory issues around competition. Any initiatives a BID takes must meet the regulatory requirements of the plan, but the plan need not make special provision favouring that area over another, nor its retail landlords and operators over their counterparts elsewhere. Warnaby (2009) makes the point that TCM and BID programmes have existed for some time in a “janitorial” capacity, focusing on basic service infrastructure, street cleaning, and the like. More recently, however, they have focused on managing occupier mix, promotions, and marketing. Hamilton already has a BID established in the 2009-2019 Long Term Council Community Plan through transformation of the Central Business Association to take up the role formally. Beyond that, it is likely that successful moves to support inner city living and redevelopment of the built fabric of the CBD should encourage spontaneous investment in catering and entertainment in key inner city precincts, and sustain niche retailing, and grocery and personal goods outlets catering for a growing residential (night-time) as well as office (day-time) central city population. Already the emergence of diverse, niche, and idiosyncratic development associated with central city revival is evident on Victoria Street from Ward to Hood Streets, overflowing into the latter.

Conclusion: Options for Hamilton Changes in consumer behaviour and the structure and process of retailing are associated with decentralisation. The slowdown of activities in the CBD is simply the other side of the decentralisation coin. Give the entrenched nature of decentralisation, and the benefits to consumers and retailers associated with it, policy resistance appears misplaced and may be better replaced by non-statutory measures to lead or encourage reinvestment and rehabilitation in the city centre In any case, the tendency towards decentralisation has been increasingly overlaid by a “return to the city”, reflecting the diversity of populations and their residential preferences. This can be promoted by more flexible planning policy, urban design initiatives and, for businesses, collaboration to lift the presence and profile of central city precincts. While this movement may still be gathering momentum in Hamilton, it is evident in redevelopment of existing inner city malls and of the southern end of Victoria Street, supplemented by a collaborative approach to development and management by landlords and occupants through the creation and council support of a Business Improvement District.

6.5 Retail Developments This section reviews current international expectations for potential changes in the retail sector.

Retail Planning and Development in Hamilton 76 6.5.1 The Web – a Retail Game Changer? A major preoccupation internationally is the likelihood that internet based shopping (e-retail) will be highly disruptive, in the same way that department stores were in the middle of the last century, malls 30 years later, and large format outlets over the past 25 years. Several responses can be anticipated to the adoption of web-based retailing. Individual stores have to exploit the internet themselves, pursuing what Rigby (2012) calls “omnichannel” retailing. This involves embracing the web both as a sales medium and as a marketing channel. The former strategy -- selling directly from the web – calls for purchasing strengths (to trade at lower prices), effective fulfilment systems, and the logistical capacity to assemble and handle goods and distribute them efficiently. The latter – using the web as a marketing tool– involves creating the capacity for consumers to decide to purchase or narrow their choices before physically embarking on a shopping trip – and directing the shopping trip to a pre-selected store to review already screened products. This requires and supports a large store format with the capacity to carry a range of brands and models, facilitating one-stop choice, and offering rapid fulfilment of an order (pick and carry). Another strategy is to ensure the appeal of the in-store shopping experience. This reflects the way mall operators have lifted the experience beyond the convenience of shopping in a single-stop environment to one which offers a variety of dining choices, personal services, entertainment, childcare, and distinctive design and ambience. In a similar way, the quality of the in-store offering and presentation, the level of service, and style of the store become attributes which attract customers for whom making a purchase is only part of the appeal of shopping. Rigby also emphasised that it is important for stores to remain innovative, maintaining a sense of novelty and development and exploiting opportunities to market, present, and fulfil sales more efficiently and effectively. The British Council of Shopping Centres analysed the likely impact of internet shopping, and expect high street shopping to thrive alongside growing use of the internet (Court, 2006). Gains in internet based purchasing were also expected to affect different retail sectors quite differently. Even as consumers move to multiple channels for shopping the physical experience is increasingly seen as a recreational experience that will remain important to many people. Surveys suggest that the sorts of initiatives that will keep people coming to stores include enhanced parking, broadening the retail experience, and a stronger focus on the customer and on customer service, on the grounds that “everybody agrees that the Internet will never replace the fun and enjoyment of going to the shops”. US retail consultants PWC (2011) see the proliferation of retail channels and a new customer frugality as reasons for cost cutting in the sector, an imperative that if nothing else will favour lower priced sites. The PWC report, though, suggest that as a result stores will be fewer and smaller, with products moved less and packaging rationalised. The disposal of products at the end of their lifecycle (particularly as product cycles become shorter) and unpopular lines will be achieved much more rapidly through electronic “one day deals” (such as Grabon) and consumer auction (such as Trade Me) channels. At the same time, increasingly diverse demographics, specialised market segments, and demanding consumers will call for greater specialisation. The Economist Intelligence Unit (2012) sees the emergence of the virtual marketplace as transforming “the global retail landscape”, reporting turnover at Amazon.com of around US$50bn in

Retail Planning and Development in Hamilton 77 2012. The uptake of a capacity to purchase from the desktop highlights the role of convenience to consumers. The emergence of smartphone app-based shopping is expected to bring this convenience to point- of-sale shopping with “mobile commerce becoming very much the mainstream means of shopping”, facilitating impulse purchases in particular. This might entail instant purchasing based on viewing television product presentations. Or it might encourage the viewing of items at a given showroom location but purchasing them elsewhere by phone using real-time, web-based price comparisons. On the other hand, digital shopping will also suit “the new austerity” as consumers become more informed and sophisticated in their purchasing decisions. Retailers will need to respond with equally sophisticated capacity for generating best prices on line for individual items, for baskets of goods, and for optimised baskets (linking items sourced through different suppliers). By enabling customers to be better informed the net it places consumer pressure on prices and thereby retail margins – in some respects it can be argued that there has been a shift in power to customers (Doherty and Ellis-Chadwick, 2011). The imperative for retailers is to reduce costs which is itself a driver of relocation and reinvestment in stores with lower rental rates and formats that reduce labour costs. This alone will favour locations closer to customers with lower ground rents and the capacity to build larger stores than is practical in the central city. The challenge of restructuring associated with these developments is not one confined to central businesses. One consequence of out-of-town centres and increasing e-commerce has been increasing financial pressure on established, smaller retailers and on smaller, older malls. Opportunities to respond include further developing the show-room concept and for traditional retailers to merge their physical and online services and to exploit a multi-channel approach to an increasingly diverse market. A physical presence in show rooms will be important to brand visibility and service. Even so, the EIU expects small retailers to suffer as the market moves in the direction of multi-channel sales. In the supermarket sector one expectation is that smaller, more dispersed and more targeted offerings will be the key to competition, with large out-of-town operations contracting (in a European context at least). This could undermine very large supermarkets as people seek to shop locally, albeit armed with knowledge of the prices among more distant competitors.

6.6 Conclusions Apart from agreeing on the disruptive impact of e-commerce commentators do not provide a consistent view of the future for retailing, and the options for investors within it. There is general agreement, though, that a much greater share of goods will be subject to electronic and – increasingly – mobile purchasing behaviour. Meeting the increasing expectations for convenience is a common thread, while consumer are likely to be more informed, more diverse, and more exacting in their demands. Individual stores will need to respond to this in a way unlikely to be favoured by definitive land use rules for store development and occupancy.

Retail Planning and Development in Hamilton 78 Conclusion: Future Possibilities Several responses to the uncertainty over the future of retailing are possible. One is for retailers to increase the scale and velocity of sales by exploiting both multi-channel retailing and the show-room advantages of large format stores. Another is to enhance the in-store experience. These various responses suggest that the growth of LFR may be constrained in the future, though, and best catered for in association through co-location around existing centres. Store size could also be reduced by more specialisation accompanied by a lift in service responsiveness and complemented by multi-channel distribution. Smaller shops may also be fine- tuned to meet the needs and tastes of the local community. Floorspace productivity should increase as a result. Mall environments and the city centre might favour a more intimate experience, offering leisure, recreational, and cultural experiences while seeking to sustain impulse shopping. With decentralisation and diversification of the retail experience malls, suburban and regional centres may also attract more community services and activities, fulfilling emerging social as well as commercial roles. These are all possibilities that favour more rather than less flexible planning provisions for retailing and associated uses.

Retail Planning and Development in Hamilton 79 7 Conclusions

This report has reviewed the recent performance and progress of retailing in Hamilton on a number of indicators. It has also considered future development prospects, both by quantifying a possible growth path and by considering the factors that may well shape demand in the future in ways which it is difficult to anticipate with any certainty. This section summarises the results with respect to the key questions raised as a result of the review of the retail policies in the Proposed District Plan.

7.1 Is promoting and preserving a hierarchy a useful retail planning method for Hamilton? The review has examined the provisions in the PDP for retailing by way of the classification and capacity of retail centres it provides for and by way of the rules set to enforce it. The planning documentation progresses from a relatively neutral position to constructing and promoting a hierarchy with three quite different centres at the top more or less servicing city-wide and sub-regional catchments (less so in the case of Chartwell ), beneath which there is a mix of suburban and neighbourhood centres. Later documents in the sequence elevate the role of the CBD to one of primacy relative to the other centres in Hamilton. While this is consistent with its share of city employment and retail floor area, it is not necessary reflected in the retail catchment from which it draws, with The Base, for example, drawing more of its custom from outside the city. The grounds for this “shaping” of the hierarchy in the planning documents are not made explicit other than as a response to the poor performance of the CBD reported in the 2008 Technical Report of the Hamilton Urban Growth Strategy. That analysis did not identify that this performance was a function of growth elsewhere, though. The Urban Growth Strategy itself focuses on reinvigorating the CBD (although it does at one point talk of “attracting activity back”). Hence, it proposed that responses to the decline of the CBD should take the form of initiatives primarily located within “walking distance of the retail heart” to promote the diversity of activity and upgrade the quality of the CBD environment. It does not suggest that the growth in Te Rapa, Chartwell, or other suburban centres is affecting the CBD, though. Rather, it distinguishes between their different roles and catchments. However, Variation 21 introduced in 2009 elevated the primacy of the CBD by managing the effects of dispersal of business activities (office and retail, community and social services) throughout “industrial and commercial service areas”. In it the claim is made, that the growth of Te Rapa was causing the slowdown in the CBD. While Variation 21 was withdrawn the PDP reinforces this position. The Section 32 analysis calls for a business centres hierarchy and includes policy to control the growth of The Base, Chartwell and suburban centres to avoid “undermining the primacy, vitality or viability of the central city”. It does not establish any additional evidence to support the causal relationship implied in this stance. Nor does it evaluate this against alternative methods of encouraging central city growth or establishing the presumed resource management advantages of doing so. The examination of retailing in Hamilton undertaken for this review does not support the adoption and preservation of an arbitrary hierarchy of centres as a useful planning method. The data and analysis are consistent simply with a network of centres: (1) dominated by a traditional CBD which

Retail Planning and Development in Hamilton 80 has recently been undergoing some reinvestment and a move towards smaller shops, more diverse activities, and a more intimate pedestrian environment; (2) a major, modern, regional retail precinct at The Base; (3) a number of suburban centres of varying size, age and function; and (4) a large number of small local centres, which also vary substantially in size. The implication is that a more broadly based approach to city-wide rules might be taken which recognises the diversity of centres and their functions, uncertainty over how they might evolve individually and collectively in the future, and the need in some instances to address particular growth demands even though the Operative District Plan makes more than adequate provision for retail land at the city-wide level. However, such rules should not seek to micro-manage development by providing for the council to influence directly what might take place where given a commitment to diversity and dynamism, other than to ensure that resource management standards and principles (including integrated planning for individual centres) are observed.

Conclusion: Is promoting and preserving a hierarchy a useful retail planning method for Hamilton? Constructing and enforcing a retail hierarchy for retail planning purposes is not supported by the evidence and seems unnecessarily limiting. The zoning of adequate new capacity in existing centres and planned growth areas remains the appropriate response to the prospect of retail growth generally. Any concerns over the detail of what might occupy that capacity and where might best be managed simply through applying structure planning and (if necessary) plan change processes that reflect changes in the role or circumstances of individual centres within a much more flexible zoning regime than proposed in the draft plan.

7.2 Does the growth of retailing in other centres harm the CBD? No evidence could be identified in the technical and planning studies reviewed of a verifiable causal link between growth outside and inside the city centre. The additional analysis undertaken does not support a link, or at least not in the form that might be amenable to direct intervention to modify it. The first part of the last decade (through to around 2006) was a period of substantial growth. However, employment growth city-wide faltered in the middle of the decade, earlier in the city centre. The construction and opening of The Base in fact restored impetus to the sector mid-decade that may not have been otherwise taken place. The construction and opening of Te Awa gave it a further boost. Chartwell more or less sustained its employment with additional investment in expansion and upgrading, although growth there eased later in the period Interestingly, the biggest CBD employment decline between 2006 and 2012 was in administrative business services, contracting much more than retailing. Employment in public administration also fell. This suggests that a decline in CBD retail activity (as measured by employment) was not the reason – or at the least not the only reason -- for the decline of the CBD. Indeed, the opposite could be the case: the loss of 2,450 CBD jobs in non-retail sectors over six years (a 13% decline) may have been the reason in part, at least, for the loss of 980 retail jobs there. Within retailing, the fall was experienced in both food and non-food retailing. Non-food retailing underpinned the growth of Te Rapa, although it is notable that employment in this sector had begun to decline in the CBD in 2004, before the opening of The Base (which may, therefore, have arrested a

Retail Planning and Development in Hamilton 81 city-wide decline). Significantly, food retailing grew most outside the three major retail areas. In other words it was subject to more general dispersal and not focused on anyone centre. A comparison with other city centres suggests that the type of structural change being experienced by Hamilton central is by no means unique, and is consistent with a tendency for retailing to fall as a share of total CBD employment as cities grow. A review of property values indicates that retail activity has stabilised if not diminished in intensity (as indicated by the value of improvements as a share of capital values) especially relative to Te Rapa. This suggests that retailing in Te Rapa is likely to be more productive, and gains in productivity are generally associated with modern, large format retail stores. Despite the continuing expansion of Chartwell and The Base and the opening of the Te Awa mall, investment has recently picked up in the CBD. This would not be expected if investors perceived that retailing in the CBD could not compete with retailing in other centres, or at least not find a position in the retail market which will sustain the investment. While renewed investment may be construed as a competitive response by CBD investors to a loss of market share, this further undermines policy intended to limit investment elsewhere. Doing so could artificially inflate rents in the central city and curtail the redevelopment necessary to maintain its productivity and attraction. Renewed investment in the central city could also be a response to a perceived and planned recovery in the inner Hamilton housing market. Developing policies to encourage such a recovery may be the most effective means of sustaining further investment in central retailing and consumer services.

Conclusion: Does the growth of retailing in other centres harm the CBD? The relatively poor performance of the CBD may be self-correcting. The current round of retail investment in the CBD may have been brought forward by the perceived competitive threat from investment elsewhere. If anything, then, competition may promote the recovery of the CBD, or at least advance the cyclical process of renewal. Experience elsewhere suggests that such renewal will lift the role of relatively small scale, high value, boutique, and specialty stores in the CBD rather than a return to traditional department stores, increasing the differentiation of centres by function and specialisation.

7.3 What effect might we expect from policies to limit retailing outside the CBD? Policies in the PDP to constrain investment in centres deemed to compete with the CBD are highly risky. First, the evidence does not support the proposition that the success of centres elsewhere is a cause of the changes taking place in the CBD, so are likely to be ineffective in terms of the objective of achieving a viable, vital, and vibrant city centre. Second, to the extent that they are anti-competitive such policies are likely to support higher central city rents than would otherwise be the case. By increasing costs to occupants and yields to building owners, this may reduce the incentive for owners to redevelop existing buildings, discouraging the investment required to maintain the centre’s primacy. Likely consequences include deterioration of the built environment and increased vacancies. Such outcomes could also limit the appeal of inner city living.

Retail Planning and Development in Hamilton 82 Third, the additional costs associated with developing new retailing in centres outside the CBD – by way of higher transaction costs and the increased risk of not securing a resource consent – may discourage investment elsewhere, undermining the health of the suburban centres. By limiting investment in this manner, the policies may artificially cap investment which would contribute to the city’s economy, thereby undermining the income streams that would otherwise contribute to the demand for CBD based goods, services, and amenities. It is this demand that will ultimately determine the vibrancy of the CBD.

Conclusion: What effect might we expect from policies to limit retailing outside the CBD? The overall outcome could be less economic activity in the city, less efficient retailing, and higher costs to consumers. Any negative impact on employment and incomes resulting from restrictive policies outside the CBD potentially undermines its commercial and social functions. Stymying the growth of other centres through policies directed at limiting investment in them may reduce city- wide income and jobs generally. This in turn reduces the demand for goods, services, and amenities found in the CBD. At best such policies will be ineffective, but they could also prove counterproductive.

7.4 What planning is needed to promote the CBD? A move away from constraining the development of larger centres to protect CBD retail investment should shift the policy focus to positive initiatives that might support the central city. Given the changes in use that have occurred over even a relatively short time, these may best address the CBD environment, its physical redevelopment, and occupation by more diverse activities generally, rather than prescribing what should be located there. The area allocated to commercial development, which the PDP proposes should be substantially increased, may need to be reconsidered in terms of quality compact development and provisions made for a variety of residential options in the inner city areas. The proposal to provide for large format retailing in and around the CBD may also need reconsideration because of the benefits of consolidating such activities in an area of freer traffic flows, and in the interests of limiting central city traffic congestion and promoting a more pedestrian and residential friendly environment there. Arrangements intended to help coordinate the regeneration of the CBD may be underpinned by public expenditure on urban design, improvement of streetscapes, enhanced parking arrangements, public transport, and the creation of additional public spaces for recreation, leisure, and walking purposes.

Conclusion: What planning is needed to promote the CBD? Several non-regulatory initiatives might better promote the vitality and vibrancy of the CBD than planning rules that limit development elsewhere. Hamilton already has a self-funding Business Improvement District covering the CBD and operated by the Hamilton Business Association in association with the council. A correction to yields and recent redevelopment Centre Place should encourage ongoing investment, so that planning rules for the CBD might move towards more flexibility of use (subject to appropriate environmental standards). Civic investment in public amenities and the quality of the public domain are important components of a quality CBD environment, along with effective transport planning, traffic management, and public transport to enhance accessibility and movement around the centre.

Retail Planning and Development in Hamilton 83 7.5 How to plan for an uncertain retailing future? Perhaps the biggest issue with implementing policies designed to constrain or shape the changes that might take place among retail centres in Hamilton is that they leave the city poorly placed to respond to, manage, and if appropriate exploit opportunities that might arise from changes in the nature of retailing. While it is useful to inform policy with potential sales projections and floorspace needs, for example, developments such as the emergence of large format retailing over the last 25 years and internet-based sales over the past 10 and their land use implications are almost impossible to predict, but can have a major impact on the shape and success of retailing. A major uncertainty is what form future consumer demand will take, as many commentators see households adjusting to lower levels of income growth and a prolonged period of increased austerity. The prospect of peak oil pricing and higher personal transport costs is a potential game changer, although to date evidence that private mobility will be significantly curtailed in the future remains under debate. If and when this occurs it is likely to be in league with greater austerity and see consumers undertake fewer trips for retailing, and focus on centres that are both accessible and can meet a wide range of their needs. Integrated suburban centres may play a more important role than the CBD under such circumstances. From an industry perspective most commentators see the impact of digital technology on selling and distribution likely to be highly influential in the near future. They see several possible outcomes from web-based shopping. These include the consolidation and perhaps expansion of showroom-style stores, building on the bulky goods model; the evolution of multichannel outlets which include but are not limited to conventional stores, internet distribution, and regular use of discount and short- term bargain sites for disposing of surplus stock; or the development of smaller, more dispersed shops targeted at particular areas and market segments with a specialty offering; or the evolution of retailing to focus heavily on in-store ambience and high levels of service. These possibilities raise the prospect that the physical demands of modern retailing, which have expanded rapidly over the past few years, might grow more slowly in the future. One likelihood is that sales:floorspace ratios increase, reducing the gross demand for retail land. Equally, there is a prospect that the move to larger scale formats in consolidated centres will increase. Across both these possibilities is the prospect that personal and household services will continue to disperse, especially as technology advances allow equal levels of service to be delivered from different locations, placing a new set of demands on retail environments.

Conclusion: How to plan for an uncertain retailing future? A planning policy which pre-empts diverse initiatives and changing retail practices, some of which cannot be easily anticipated, risks distorting, deferring or deflecting such developments at a cost to the retail sector and the city’s residents. This review of retail performance and prospects in Hamilton suggests that increasing rather than reducing flexibility is likely to lead to better social and economic outcomes. In this respect, any shift away from the flexibility of the Operative District Plan and intervention in economic (rather than environmental) processes raises significant policy risks under the Proposed District Plan.

Retail Planning and Development in Hamilton 84 References

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