You Win Some, You Lose Some

Market Indicators Report 2017 NEW ZEALAND RETAIL You Win Some, You Lose Some Accelerating success.

Commercial Bay Retail Centre Cnr Queen Street & Customs Street West, Auckland Central Precinct Properties 39,000 sqm PwC Tower and 18,000 sqm Commercial Bay retail centre in downtown Auckland is underway. The retail and hospitality spaces span three levels and will feature an expansive new food hall called Harbour Eats, designed by New York-based designer AvroKO. The complex will have 700 seats and open air atriums. The retail precinct is anticipated to be home to 100 retailers, a mix of 30% major retailers, 45% specialty retail and 25% food and beverage. The Commercial Bay retail centre is expected to open by early-2019. Artist's impression

Contents Retail Market Indicators 2017 4 Introduction 6 Key Findings 6 Auckland 8 Wellington 10 Christchurch 12 Hamilton 13 Tauranga/Mt Maunganui 13 Rotorua 13 Hawke's Bay 13 Dunedin 14 Queenstown 14 Outlook 15 colliers.co.nz/find-research Join our LinkedIn group: Colliers International New Zealand Follow us on Twitter: @ColliersIntNZ Subscribe on YouTube: ColliersIntNZ

IN BRIEF NEW ZEALAND RETAIL MARKET INDICATORS 2017 1 AUCKLAND 5 HAWKE'S BAY Vacancy: Retail Investor Confidence: 3.3% $1,014/m 2 $533/m 2 5.6% 7.6% $423/m 2 $248/m 2 7.1% 7.8% Net Positive: 16% 2 HAMILTON $388/m 2 $175/m 2 6.5% 9.1% 8 3 TAURANGA/MT MAUNGANUI $444/m 2 $231/m 2 5.4% 6.1% 4 ROTORUA $265/m 2 $150/m 2 6.5% 8.3% 9 11 Source: Colliers International Research Refer to Market Indicators on page 7 for further breakdown. Comparing Q3-16 to Q3-17 for financial indicators & Q2-16 to Q2-17 for physical indicators. 10 4

1 2 3 6 PALMERSTON NORTH 4 $450/m 2 $150/m 2 7.0% 9.5% 5 7 WELLINGTON 6 Vacancy: Average Prime Gross Rent: Average Secondary Gross Rent: 5.6% $1,295/m 2 $730/m 2 6.9% 7.4% 7 Retail Investor Confidence: Net Positive: 6% 10 DUNEDIN 8 NELSON Vacancy: 8.3% $850/m 2 $300/m 2 6.8% 9.5% $575/m 2 $325/m 2 6.8% 7.3% 11 QUEENSTOWN 9 CHRISTCHURCH $1,650/m 2 $725/m 2 4.5% 5.5% $825/m 2 $513/m 2 6.6% 7.3% Retail Investor Confidence: Net Negative: 4% 5

Introduction Retail Investor Confidence Auckland Wellington Christchurch Strong population growth and booming tourism have consolidated the positive retail environment in New Zealand over the past 12 months. Yields have continued to firm with interest from offshore and local investors keeping competition high. Like the other commercial sectors, investors are struggling to find opportunities to purchase. The environment remains challenging for some retailers, illustrated by several corporate failures. The rise of e-commerce is constantly challenging traditional brick and mortar stores and shopping malls to adapt and evolve. Net Percent 80% 60% 40% 20% 0% -20% -40% -60% Sep-12 Mar -13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 The ANZ Business Confidence Index has turned negative in October 2017, falling to a net 10% pessimistic about the year ahead. This marks a 10-point fall in a month. Most survey responses were received in the first half of October before the government coalition was decided. The survey primarily reflects the uncertainty around the outcome rather than the outcome itself. Consumer confidence has showed some resilience despite recent house price easing and political uncertainty post-election. The ANZ-Roy Morgan Consumer Confidence Index dropped 3.5 points to 123.7 in November 2017, down from 127.2 from 12 months ago, but still highly positive. -80% Source: Colliers International Research Retail Property Sales by Region Auckland Region Wellington Region Canterbury Region Rest of New Zealand Number of Sales $3,500 3,500 Food and beverage spending in New Zealand has grown considerably in 2017, supported by the booming tourism market and the influx of visitors for the World Masters Games and the Lions rugby tour. Annual international visitor arrivals hit 3.68 million for the September 2017 year, up 9% compared to a year ago. Total retail sales value grew 5.4% on an annual basis in September 2017. The biggest core retail contributors were supermarket and grocery stores spending at $4.7 billion, followed by food and beverage, making up a total value of $2.7 billion. Value of Sales $(millions) $3,000 $2,500 $2,000 $1,500 $1,000 $500 3,000 2,500 2,000 1,500 1,000 500 Number of Sales Retail property sales in New Zealand reached $867 million in the 10 months to October 2017, made up of 556 sales. More than half (60%) occurred in Auckland. The full year in 2016, reached $2.5 billion. $0 2007 2008 2009 2010 2011 Source: CoreLogic, Colliers International Research 2017 sales data up to October (not a full year). 2012 2013 2014 2015 2016 2017 0 Key Findings Retail Spending by Category > > Strong visitor numbers into New Zealand are helping boost retail sales, especially in the food and beverage sector. Core Retail Supermarket & grocery stores Food & beverage services 7.7% 2.9% > > Tenant demand remains buoyant on the main CBD strips in Auckland and Wellington. > > New retail developments in central Christchurch are taking shape, bringing back more foot traffic into the area. > > Regionally, Hamilton, Tauranga, and Queenstown continue to benefit from strong population growth and tourist inflows, with positive flow on effects to the retail sector. > > The demise of some high-profile retailers highlights the competitive nature of the retail market and threats from growing e-commerce. This may limit landlords ability to increase rents significantly over the short term. Hardware, building & garden supplies Pharmaceutical & other store based retailing Department stores Accommodation Clothing, footwear & accessories Electric & electronic goods Furniture, floor covering, houseware & textiles Recreational goods Non-store & commission based retailing Specialised food Liquor 3.3% 4.1% 3.1% 9.8% 8.7% 8.8% 3.7% 1.2% 14.9% 5.1% 11.9% > > Consumer preferences are ever changing. Online shopping, click and collect services, same day delivery orders, food subscription boxes, are all gaining traction, and diverting traffic away from physical stores. > > Shopping centres have been evolving, with mall owners continuing to invest heavily in expansion to reinvigorate tenancy mix and enhance shoppers experience, through improved amenities like free Wi-Fi, retail laneways, outdoor dining areas and well-designed shared spaces. Vehiclerelated Motor vehicles & parts Fuel 0.1% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $ (million) Source: Stats NZ, Colliers International Research Actual retail sales values for September 2017 year. Data label is the annual percentage change from same quarter previous year. 9.5% 6

New Zealand Retail Market Indicators Q3 2017 Precinct AUCKLAND Net Prime Rents ($/m²)*** Net Secondary Rents ($/m²)*** Prime Capital Value* ($/m²) Secondary Capital Value* ($/m²) Prime Market Yields** (%) Secondary Market Yields** (%) Low High Low High Low High Low High Low High Low High CBD 1,700 4,300 800 1,000 28,335 95,555 9,410 15,385 4.50% 6.00% 6.50% 8.50% Newmarket 800 2,000 500 750 13,335 47,060 5,880 10,000 4.25% 6.00% 7.50% 8.50% Ponsonby Road 750 1,350 550 750 12,500 31,765 N/A N/A 4.25% 6.00% N/A N/A Parnell Rise 600 850 N/A N/A 8,570 18,890 N/A N/A 4.50% 7.00% N/A N/A Dominion Road 325 520 N/A N/A 4,645 10,945 N/A N/A 4.75% 7.00% N/A N/A Takapuna 500 1,000 300 450 7,145 22,220 3,530 6,000 4.50% 7.00% 7.50% 8.50% HAMILTON CBD 250 525 100 250 3,570 8,750 975 3,125 6.00% 7.00% 8.00% 10.25% ROTORUA CBD 180 350 100 200 2,485 6,085 1,175 2,500 5.75% 7.25% 8.00% 8.50% TAURANGA CBD 300 450 175 250 4,615 8,180 2,335 3,845 5.50% 6.50% 6.50% 7.50% MT MAUNGANUI CBD 375 650 200 300 7,145 15,295 3,480 6,315 4.25% 5.25% 4.75% 5.75% NAPIER CBD 450 700 200 450 6,000 10,770 2,500 6,000 6.50% 7.50% 7.50% 8.00% HASTINGS CBD 220 320 120 220 2,750 4,925 1,410 2,935 6.50% 8.00% 7.50% 8.50% PALMERSTON NORTH CBD 300 600 100 200 4,000 9,230 1,000 2,220 6.50% 7.50% 9.00% 10.00% WELLINGTON Lambton Quay 2,120 2,282 680 780 30,285 36,510 9,060 10,750 6.25% 7.00% 7.25% 7.50% Willis Street 881 1,424 N/A N/A 11,740 21,900 N/A N/A 6.50% 7.50% N/A N/A Courtenay Place 764 986 N/A N/A 10,180 15,160 N/A N/A 6.50% 7.50% N/A N/A Cuba Mall 682 1,225 N/A N/A 9,095 18,845 N/A N/A 6.50% 7.50% N/A N/A NELSON CBD 450 700 250 400 6,000 11,665 3,335 5,715 6.00% 7.50% 7.00% 7.50% CHRISTCHURCH City Mall 650 1,200 500 600 9,630 20,000 6,665 8,890 6.00% 6.75% 6.75% 7.50% CBD 650 800 350 600 8,665 13,335 4,375 8,570 6.00% 7.50% 7.00% 8.00% QUEENSTOWN CBD 1,300 2,000 450 1,000 26,000 50,000 7,500 20,000 4.00% 5.00% 5.00% 6.00% DUNEDIN CBD 500 1,200 150 450 6,250 21,820 1,365 5,625 5.50% 8.00% 8.00% 11.00% ***Wellington based on gross face rents Main Retail Centres Market Indicators Q3 2017 AUCKLAND Shopping Centres Net Face Rents ($/m²)*** Operating Expense ($/m²) Prime Capital Value* ($/m²) Prime Market Yields** (%) Low High Low High Low High Low High Regional Shopping Centres 650 1,850 170 270 8,385 32,745 5.65% 7.75% District Shopping Centres 260 750 150 230 2,970 12,000 6.25% 8.75% Bulk Retail Centres 200 450 45 75 2,425 7,200 6.25% 8.25% WELLINGTON Regional Shopping Centres 700 1,450 170 230 6,250 17,855 7.00% 8.00% District Shopping Centres 585 1,235 270 300 3,335 12,665 7.50% 9.00% Bulk Retail Centres 260 355 40 70 2,280 4,000 7.50% 9.00% CHRISTCHURCH Regional Shopping Centre 600 2,500 170 270 6,665 25,715 7.00% 8.00% District Shopping Centres 350 1,800 150 230 3,500 31,250 8.00% 9.00% Bulk Retail Centres 200 330 25 60 2,105 4,715 7.00% 8.50% Source: Colliers International Research Assumes 100 sqm shop *Assuming fully leased at market rates **Assuming freehold Note: Figures are rounded ***Wellington based on gross face rents 7

Auckland Auckland Retail Vacancy Jun-16 Jun-17 The Auckland retail sector is holding firm despite plateauing house prices and changes in business and consumer confidence post-election. The growing population is bolstering demand for goods and services which bodes well for retail activity overall. Supply & Demand > > Strip retail vacancy in Auckland remains tight, having reduced to 3.3% in June 2017 (down 1.5% from a year ago), now at levels not seen since mid-2015. > > Retail vacancy in Queen Street has increased marginally to 2.8% in September 2017, up 0.1% from a year ago. Strong tenant demand for prime retail space continues. > > Precinct Properties, the owner of the new $941 million Commercial Bay development is set to open its 18,000 sqm retail offering in two phases. Phase one is scheduled to open by mid 2018 (20%), while the balance (80%) is scheduled for Q1 2019. Vacancy Rate 12% 10% 8% 6% 4% 2% 0% Overall CBD Queen St Newmarket Source: Colliers International Research *New to the survey Parnell Ponsonby Rd Dominion Rd Takapuna Henderson Massey North /Westgate Otahuhu* > > Sylvia Park, one of New Zealand s largest shopping centres, owned by Kiwi Property is underway with a new dining lane, The Grove, which integrates with the 10-level office tower currently under construction. In advanced planning is a proposed new galleria level expansion for a further 20,000 sqm. WestCity Waitakere 7 Catherine Street, Henderson, Auckland > > Kiwi Property has also expanded its land holdings in Mt Wellington to over 30 hectares by acquiring two properties, at 79 Carbine Road and 10 Clemow Drive adjoining Sylvia Park for $27.1 million. There are no immediate plans to redevelop the land. > > A major shopping expansion project at Westfield Newmarket, owned by Scentre Group is not yet confirmed, but if it proceeds will see the centre expand to 78,000 sqm from the existing 31,000 sqm. New anchor tenants proposed include Farmers, Countdown and cinemas. Rents & Incentives > > Auckland CBD average net face rents have increased 1.8% over the past 12 months, reaching $2,850 per sqm in September 2017, from $2,800 per sqm. Low vacancy for prime retail space is likely to keep rentals firm in prime locations. > > Queen Street continues to command the highest rents in Auckland, highlighting the importance of profile and exposure to foot traffic. > > Non-CBD landlords expectations of rent rises over the next year are likely to be modest. Adelaide based Angaet Group purchased the 36,108 sqm shopping centre for $153 million from owners Scentre Group. The five hectare freehold mall includes key anchors such as The Warehouse, Farmers, Countdown and Event Cinemas. Hunters Plaza 217 Great South Road, Papatoetoe, Auckland Yield & Investment > > Investor sentiment in Auckland retail property was a net positive 16% in our September 2017 confidence survey, down from net positive 47% from a year ago, but higher than the June quarter. > > Average prime CBD retail yields have firmed 30 basis points, to 5.6% in September 2017 from a year ago. > > Major transactions over the past 12 months included the sale of the former Westfield WestCity, selling for $153 million to Adelaide based Angaet Property Group. Hunters Plaza and Kelston Shopping Centre also transacted in 2017, selling for $50.6 million and $36 million respectively. Hunters Plaza was purchased by the listed Australian fund, Elanor Investors Group for $50.6 million in June 2017. The centre has a net lettable area of 15,885 sqm and was the investor s first New Zealand acquisition, with a tenant remixing plan due to commence at the end of 2017. 8

S O U T H E R N M W Y UPPER HARBOUR MWY NORTH WESTERN MWY 18 Northern Shopping Centres 2.6% Takapuna NORTHERN MWY 4.1% $750 5.8% College Hill Entertainment/Service 2.3% $1,095 Ponsonby Auckland CBD 0.5% $1,050 5.1% Henderson Central Shopping Centres 5.5% $325 6.1% 2.1% Newmarket 16 A U C K L A N D H A M I L T O N H W Y Victoria St West Wellesley St West Victoria St East Customs St West National Branded 3.9% $2,700 Parnell 6.2% $725 16 5.9% 2.5% $1,400 5.1% Queen St Queen St Queen St Queen St BRITOMART High St Stanley St Luxury/International 0.6% $3,700 Shortland St Wellesley St East Stanley St Western Shopping Centres KEY 2.5% Overall Vacancy Rates (%) Average Prime Retail Net Rents ($/m 2 ) Average Prime Market Yields (%) Trend Crummer Rd SOUTH WESTERN MWY Dominion Rd 4.2% $435 16 5.9% N O R T H W E S T E R N M W Y S O U T H E R N M W Y Southern Shopping Centres 1.1% A U C K L A N D H A M I L T O N H W Y Eastern Shopping Centres 0.7% Actual 0%/$0 Financial Indicators: Sep-16 to Sep-17 Physical Indicators: Jun-16 to Jun-17 20 Source: Colliers International Research Auckland Retail Market Review 2017 compared to 2016 Note: Shopping centres include city centres, town centres, regional centres, district centres, neighbourhood centres, bulk retail centres and others. Enquiry = Consumer confidence = Investor confidence net positive 16% Supply Demand Buyer groups = private, institutional investors and syndicators Average prime net rents $1,014/m 2 Average secondary net rents $533/m 2 Average prime yields 5.6% Average secondary yields 7.6% Overall vacancy 3.3% (Jun-17) 9

Wellington Lambton Quay has flourished over the past few years, receiving most of the tenant enquiries from national and international retailers, but low vacancy is making it difficult to find suitable space. For those who can t wait, tenant demand has shifted to other precincts within the central city including Willis Street. Supply & Demand Wellington Retail Vacancy Vacancy Rate Jun-16 Jun-17 25% 20% 15% 10% 5% > > Demand remains strong for retail space in Wellington with the overall retail vacancy rate reducing to 5.6% in June 2017, down from 8.9%, a year ago. > > Lambton Quay continues to be highly sought after with vacancy reducing to 3.3% in June 2017, down from 3.5%, a year ago. Topshop New Zealand went into receivership in September 2017 leaving close to 1,300 sqm. The next survey is likely to show increased vacancy. 0% Overall CBD Core Lambton Quay Source: Colliers International Research Willis St Manners St Cuba St Dixon St Courtenay Pl > > Increased interest on Willis Street by a growing list of high end retailers has seen retail vacancy tightening to 6.8% in September 2017, down 1% from a year ago. > > Some retailers around Lambton Quay, Manners Street and Cuba Street will have to relocate as remedial work gets underway on a number of buildings. Rodd & Gunn 46 Willis Street, Wellington Central > > Strengthening work is taking place on Stewart Dawson's corner which has displaced a number of retailers including Rodd & Gunn who have relocated to 46 Willis Street on a new 11-year lease term. > > New developments are also occurring on Victoria Street and Lombard Lane, in addition to the strengthening on the former Farmers building on Cuba Street, refurbishment to 7 Woodward Street and a new retail block on a car park in Thorndon Quay. Rents & Incentives > > Average prime retail gross rents in Wellington CBD have increased 7.3% from a year ago, reaching $1,295 per sqm in September 2017. > > Gross prime rents on Lambton Quay grew 9.8% from a year ago reaching $2,200 per sqm on average. The outlook for prime rents is stable over the next 12 months. > > Secondary retail space rents have remained relatively flat over the past 12 months. > > Bulk retail rents have remained steady over the past year. Rodd & Gunn has signed a new 11 year lease at 46 Willis Street and features an extensive fit out encompassing the New Zealand lodge feel which includes high ceilings, and natural materials like timber and stone. H&M, Queensgate Shopping Centre Queens Drive & Bunny Street, Lower Hutt, Wellington Yields & Investment > > Investor confidence in Wellington retail property was a net positive 6% in our September 2017 confidence survey, a decline from a year ago (net positive 30%), highlighting the more negative sentiment post-earthquake. > > Investment activity has been at low levels over the past 12 months, with a shortage of prime assets available for sale. Retail property sales for the 10 months to October 2017 reached $54.2 million, made up of 43 sales. Full year results in 2016 totalled $170 million. > > Average retail prime yields in the CBD have remained steady over the past 12 months sitting at 6.9% in September 2017. Bulk retail yields have firmed 50 basis points to 8.25%. H&M opened its first Wellington store in October 2017, taking up over 2,000 sqm in Queensgate Shopping Centre. The retail space spans two levels and forms part of the mall s rejuvenation strategy after it was hit by the 2016 Kaikoura earthquake. 10

Lambton Quay Lambton Quay 3.3% $2,201 6.6% North City 0.0% Willis Street 6.8% $1,152 7.0% 2 Willis St Willis St Cuba Street 3.5% Johnsonville Shopping Centre 3.9% Wellington CBD 1 2 Queensgate Shopping Centre 0.4% P R O P O S E D Dixon St Cuba St Cuba St Manners St Courtenay Place 9.2% $875 7.0% Manners Street 8.4% Courtenay Pl KEY Overall Vacancy Rates (%) Average Prime Retail Gross Rents ($/m 2 ) Average Prime Market Yields (%) Trend Cuba St Actual Financial Indicators: Sep-16 to Sep-17 Physical Indicators: Jun-16 to Jun-17 0%/$0 Source: Colliers International Research Prime strip retail based on 100 sqm shop area Wellington Retail Market Review 2017 compared to 2016 Enquiry = Consumer confidence = Investor confidence net positive 6% Supply Demand Buyer groups = private and institutional investors Average prime CBD gross rents $1,295/sqm Average secondary CBD gross rents $730/sqm Average prime yields 6.9% Average secondary yields 7.4% Overall vacancy 5.6% (Jun-17) 11

Christchurch The Crossing 166 Cashel Street, Christchurch Central The completion of new office developments is bringing workers back into the CBD, stimulating much needed foot traffic for retailers. The completion of major retail developments over the past 12 months has further revived the retail precinct. Supply & Demand > > The large number of new developments completed in the last 12 months has created plenty of options for retailers in the Christchurch CBD. > > The retail status of the CBD is improving, but still competes with the retail offering in the more established, suburban malls. > > Some Christchurch retailers are taking a wait and see approach, and holding back from re-entering the CBD to see how the city evolves and where the retail hot spots emerge. > > The Crossing Shopping Centre opened in September 2017, featuring 55 retail tenancies, a 700 space car park, a high-end supermarket, and top fashion brands such as H&M, Country Road, among other retailers. The development is the largest privately-owned development in the CBD. The Crossing Shopping Centre on Cashel Street in central Christchurch opened its doors to shoppers in September 2017. It features a 700-space car park and a high-end supermarket, plus 55 retail tenancies and top fashion brands H&M, Country Road, Trenery, Witchery, Seed and Rodd and Gunn. The Terrace Cnr Oxford Terrace, Christchurch Central > > The Terrace development, bordering the Avon River, is expected to open in November 2017. The retail offering is predominately food and beverage with laneways, courtyard and corporate offices above. > > Retail space on Cashel Street continues to be in hot demand. > > In the suburban areas, there has been talks of further expansion to existing shopping centres. > > Kiwi Property is in the early planning stages of reviewing plans to extend Northlands Shopping Centre, the second largest mall in Christchurch. It has resource consent to extend the largest mall for additional stores and foodcourt, offering outdoor seating areas. > > Homebase Centre, north-east of Christchurch has land re-zoned with plans for expansion including a new supermarket. Rents & Incentives > > Typical net prime rents in the CBD continue to sit between $650 and $800 per sqm, with incentives being offered to attract retailers back into the CBD. > > Shopping centre rents have levelled out over the past 12 months, due to the increased level of new supply in the CBD. A $140 million redevelopment of the Christchurch hospitality precinct once known as The Strip on Oxford Terrace. The Terrace will feature premium restaurant and bar offerings, with laneways, courtyards, roof terraces and corporate offices above. The Hub Hornby 418 Main South Road, Hornby, Christchurch Yield & Investment > > Investor confidence in Christchurch retail property has dipped into negative territory at a net negative 4% in our September 2017 confidence survey, a decline from a year ago, which was a net positive 12%. The most recent quarter s results show this trend stabilising. Shopping Centre Investments Limited have undertaken a $70 million redevelopment at The Hub Hornby. The regional shopping centre is anchored by a 6,000 sqm Farmers and 6,400 sqm PAK nsave and has over 70 speciality stores. 12

REGIONAL UPDATES Hamilton > > Hamilton has experienced a considerable amount of retail tenant churn over the past 12 months. Rents have remained static over the past 12 months. > > Seasonally adjusted annual retail spending in the Waikato region grew 7.2% in June 2017 quarter according to Statistics New Zealand, surpassing the rate of growth in the Auckland region of 6.2%. > > Major developments including two major inland ports, major expressway links, a new riverside theatre and new residential housing areas, are all contributing to the growth of the city. > > The average prime retail yield in Hamilton sits between 6% and 7% in September 2017, firming around 50 bps over the past 12 months, driven by strong appetite for investment under $5 million. > > Yields for prime assets are expected to hold strongly, however investors are becoming more selective when considering secondary assets. > > Hamilton s total value of retail property sales in the 10 months to October 2017 reached $27.7 million. It continues to be one of the most active regional hotspots in New Zealand. Tauranga/ Mt Maunganui > > Food and beverage enquiries have help spur retail activity in the Tauranga CBD, but increased availability of retail space has seen net prime rents dip slightly, ranging between $300 and $450 per sqm over the past year. > > New developments at 2 Devonport Road and the civic administration building are expected to be completed in 2020. > > Tenant demand continues to be exceptionally strong in Mt Maunganui, increasing over the last 12 months. Rents sit between $375 and $650 per sqm for prime space. > > A $100 million redevelopment of the Farmers building in Tauranga s CBD will see between 70-90 high rise apartments constructed above the retail complex. The retail will spread over two expansive floors with multiple levels of carparking for close to 400 vehicles. > > Bayfair shopping mall, owned by AMP Capital has revealed plans for a $100 million expansion upgrade including 50 new shops, a new Countdown, and a seven-screen cinema complex. Rotorua > > Retail vacancy has tightened further over the past 12 months with the popular Eat Street at the lake end of Tutanekai Street receiving more demand than it can keep up with. > > Increasing tourism numbers and retail spend have driven further development in Rotorua, attracting food and beverage operators. > > Kmart is set to open its first store in Q1 2018, anchoring the $20 million redevelopment of Trade Central, which is expected to add up to 20 new stores. Kmart is expected to occupy 5,300 sqm joining the existing Mitre 10 Mega. > > The second stage of Lynmore Junction is complete, providing several new restaurants, a gym and a dental practice. > > Prime yields for high quality retail stock are achieving sub 6% with secondary yields between 8% and 8.5%. Hawke's Bay > > Tourism spending in Hawke s Bay region grew 7.7% in the year to September 2017, according to the Monthly Regional Tourism Estimates by Ministry of Business, Innovation and Employment, surpassing the rate of growth in the Auckland region (6.1%). > > Buoyancy in the retail market has kept vacancy low in both Napier and Hastings, especially in the main strip, where rents have remained stable. > > Prime retail rents in Napier typically range between $450 and $700 per sqm, with Hastings between $220 and $320 per sqm. > > Wallace Developments has lodged a resource consent for a 5,000 sqm large-format development on the opposite corner from Mitre 10 Mega on Prebensen Drive. > > Retail yields in the Hawke s Bay remains steady, with the volume of transactions slowing, due to the limited availability of stock available for sale. 13

Dunedin > > Prime retail space is hard to find in Dunedin CBD, but conversely, secondary vacancy has been increasing over the past 12 months. This has pushed overall retail vacancy up to 8.3% in June 2017. > > Earthquake strengthening is still prevalent in the CBD, as older buildings get upgraded to meet council standards. > > Food and beverage has been on the rise in Dunedin with the north end of George Street continuing to attract boutique cafes, and the Warehouse precinct fast becoming an eatery hot spot. > > Tenant demand for bulk retail is outstripping supply, constrained by the lack of affordable development land for bulk retail use. Dunedin Retail Vacancy Vacancy Rate 8.4% 8.2% 8.0% 7.8% 8.1% 8.1% 8.0% 8.2% 8.3% > > Investor demand remains strong for prime retail investments from locals and investors, especially those well-tenanted buildings situated in prime locations. 7.6% 7.6% > > Landlords and investors are continuing to hold assets while capturing good returns, with little incentive to sell, limiting the availability of stock for sale. 7.4% Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Source: Colliers International Research Queenstown > > Tourist arrivals into Queenstown Airport have reached 1.97 million passengers visitors in the year ended October 2017. > > Retailers on the CBD main streets continue to benefit from increased tourist traffic. Vacancies are rare. > > With relatively tight supply in the CBD, further upward pressure on retail rents is expected, particularly in the prime sector. > > Frankton continues to expand, as it aims to service the growing Queenstown population, which is currently growing at three times the national average. > > Queenstown Central, a new town square, is the newest retail development going ahead in Frankton. It sits between Five Mile and the PAK'nSAVE. Stage one is expected to be completed in October 2018, comprising 10,000 sqm of retail, 4,500 sqm of office and anchored by Kmart, built across a 7.5 hectare mixed use site. > > Stage two of Five Mile was completed early 2017, adding an additional 8,000 sqm to the existing centre, anchored by The Warehouse and Noel Leeming. > > The significant increase in retail supply in Frankton is creating plenty of options for retailers. Rents should remain flat over the next 12 months. Queenstown Central Frankton, Queenstown Queenstown Central is under construction in Frankton by developer, Queenstown Central Limited. Stage one will comprise of 10,000 sqm of retail and 4,500 sqm of office, anchored by Kmart and featuring vibrant main street and town square, speciality shops, restaurants and bars. Queenstown Development Map THE LANDING HAWTHORNE DRIVE 14

Outlook It s been a year of ups and downs for the retail market. The growth in population and tourism has boosted retail activity across New Zealand. Changes in the demographics through new housing developments are also influencing retail demand characteristics. Retail sales volume has been growing, but margins haven t always followed suit. The number of high-profile retail closures this year highlights the cost burden associated with establishing brick and mortar stores including high rents in prime areas and wages. Shopping centres have been evolving, with mall owners continuing to invest heavily in expansion to reinvigorate tenancy mix and enhance shoppers experience, through improved amenities like free Wi-Fi, retail laneways, outdoor dining areas and well-designed shared spaces. Moderating consumer confidence and house prices are hurdles for retailers in the short term. Landlords will have to be realistic about rental uplifts. However, the underlying economic drivers for New Zealand remain strong. Consumer preferences are ever changing. Online shopping, click and collect services, same day delivery orders, food subscription boxes, are all gaining traction, and diverting traffic away from physical stores. NorthWest Stage 2, 1 Maki Street, Westgate, Auckland 15

Tauranga Crossing Taurikura Drive, Tauriko, Tauranga Stage 1 of Tauranga Crossing shopping centre opened in September 2017, featuring more than 20 speciality stores. Stage 2 will provide a fully enclosed two level shopping centre including approximately 90 specialty shops, eateries, and cinema. Stage 2a is expected to open in late-2018 while Stage 2b is expected to open in mid-2019. For more information contact: Alan McMahon National Director Research & Consulting David White Director Consulting Leo Lee Research Manager Elena Christodoulou Research Analyst Emily Duncan Research Analyst 2015 & 2016 RICS Award Josh Lee Research Co-ordinator Chris Farhi Director Strategic Consulting Caity Pask Senior Analyst Strategic Consulting Colliers International Level 27, SAP Tower 151 Queen St, Auckland +64 9 358 1888 Colliers International Research and Consulting offers a range of commercial and residential property solutions: Property Investment Strategies Demand & Supply Studies Market Analysis & Forecasts Feasibility Analysis GIS Spatial Analysis Catchment Analysis Lease Audit & Benchmarking Site Options Analysis Corporate Real Estate Strategy Financial Analysis Business Cases Whilst all care has been taken to provide reasonably accurate information within this report, Colliers International cannot guarantee the validity of all data and information utilised in preparing this research. Accordingly Colliers International New Zealand limited, do not make any representation of warranty, expressed or implied, as to the accuracy or completeness of the content contained herein and no legal liability is to be assumed or implied with respect thereto. All content is Copyright Colliers International New Zealand Limited 2017 and may not be reproduced without expressed permission. Licensed REAA 2008