The story began in 1987 when Foodstuffs acquired an interest in the land. In 1990, they applied for a resource consent. Nineteen years later, after two failed resource consent applications, a zoning change, a new resource consent, and about four years of litigation, they finally opened.
Things have improved slightly since then. At least it is harder for supermarkets to tie each other up in court over consenting issues.
But getting planning permission remains fraught.
At this weekend’s ACT Party convention, Leader David Seymour announced his party’s support for a fast track for supermarkets.
Their proposal would provide a one-stop shop for re-zoning, consenting, and investment approvals for a new player proposing at least ten stores. Incumbent supermarkets would not have access to the fast-track regime for five years, giving challengers a head-start.
As Seymour put it,
“Projects should not be blocked, scaled back, or burdened with conditions just because they’re outside existing retail centres or might compete with dominant supermarket chains.
Every approved development could also be mixed-use. That means a supermarket could have apartments or other commercial activities above it, making projects more attractive to investors who want to diversify and aren’t sure the New Zealand groceries market is big enough to open a supermarket on its own.”
On Monday morning, Heather du Plessis-Allan asked the Prime Minister whether he liked ACT’s suggestion. Luxon replied that, “Suffice to say, Nicola Willis is all over fast-track and considering it in the space around supermarkets and has been for some time. …I don’t want to get ahead of myself, because she has a process she’s following…. We’re up for fast-track.”
It’s encouraging. There is a real problem to solve.
Chapter six of the Commerce Commission’s market study into supermarkets focused on land supply issues that hinder entry.
Councils zone few sites for new grocery retail. Councils often set limits on the number and size of supermarkets that can be allowed in different places, making it hard for a new entrant to find a spot where a supermarket would be allowed.
The situation has not improved since then. Last month, Woolworths spoke out about the nearly decade-long process for getting a new supermarket up in Halswell, a suburb of Christchurch.
Their New Zealand Director of Property, Matthew Grainger, spoke with Chris Lynch Media about their saga.
“In New Zealand, we have very complex planning laws,” Grainger said. “The time it takes to get approval to establish a new supermarket is very protracted. In this case, it took us over four years just to get consent. That’s why we’re supportive of the Commerce Commission’s recommendation to free up planning laws and improve access to retail grocery sites.”
“We’re not singling out a particular party. Our frustration is with the system itself. There are neighbour issues, infrastructure considerations, and a general level of red tape that’s become normal. These delays are not uncommon anymore, and that’s the real problem.”
It took one year and forty-five days to build the Empire State Building. It should not take longer than that to get planning permission to build a supermarket.
And even in places where zoning may not be an issue, consenting can be difficult – for the most absurd reasons.
Resource management commissioners do not like activities that could create “adverse retail distribution effects.”
What’s an “adverse retail distribution effect”? I’m glad you asked!
Imagine that you proposed building a new store – a store so wonderful that everyone in town would shop at your new store rather than the places where they currently shop. The neighbourhoods around those existing stores might suffer because of your competitors’ loss of customers.
That is an “adverse retail distribution effect”.
Avoiding those effects can mean having to prove that there is so much pent-up demand for your kind of store that the existing competitors’ sites would not be harmed. That means commissioning reports from experts who will claim that there are more than enough customers for everyone.
It encourages a type of coziness that is simply terrible for consumers. If the two main supermarket chains agreed with each other to never build a new store unless they were both satisfied that there were plenty of customers for everyone, the Commerce Commission would likely pursue criminal cartel charges against everyone involved. But when that outcome is achieved by planner fiat, the most the Commerce Commission will do is mention it in a chapter of a market study.
Now think about all of this from the perspective of a potential entrant to the grocery sector, coming in from abroad. If even large incumbent supermarkets with extensive experience of the planning systems across dozens of councils still have stores held up for years, with vacant paid-for sites racking up legal bills, there is little chance for outsiders to make a go of things.
Kaufland, part of the German conglomerate that also owns Lidl, gave up its attempt to enter the Australian market in January 2020, pre-Covid. Australia’s “highly restrictive planning laws and lack of development opportunities due to sub-optimal land use zoning” was part of the problem. Kaufland had sunk hundreds of millions of dollars into Australia before cutting its losses.
If Australia’s much larger market was not worth the cost of dealing with Australia’s planning system, New Zealand’s smaller market will be even less attractive unless our planning system changes. Others will know of Kaufland’s retreat from our part of the world.
Visible and credible planning reform is needed if the government wants to enable and encourage real entry.
In late May, the New Zealand Initiative’s Benno Blaschke laid out the framework for the kind of fast-track regime that would break those regulatory barriers to entry. Benno and I also had a New Zealand Initiative podcast explaining how we hoped it might work.
Abolishing regulatory barriers to entry cannot guarantee that a new player will want to enter. But it is needed to make that entry possible. And that threat of potential entry provides competitive discipline.
Not nearly enough developers put up signs like the one at the Wairau PAK’nSAVE, despite also having awful experiences. Getting offside with the local planning department could mean future retaliation.
But I would like a sign at the front of any new store that might follow from any new fast-track for supermarkets. Showing New Zealand can be capable of doing things as fast as New York could in 1930 would be a demonstrable success.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
At this weekend’s ACT Party convention, Leader David Seymour announced his party’s support for a fast track for supermarkets.
Their proposal would provide a one-stop shop for re-zoning, consenting, and investment approvals for a new player proposing at least ten stores. Incumbent supermarkets would not have access to the fast-track regime for five years, giving challengers a head-start.
As Seymour put it,
“Projects should not be blocked, scaled back, or burdened with conditions just because they’re outside existing retail centres or might compete with dominant supermarket chains.
Every approved development could also be mixed-use. That means a supermarket could have apartments or other commercial activities above it, making projects more attractive to investors who want to diversify and aren’t sure the New Zealand groceries market is big enough to open a supermarket on its own.”
On Monday morning, Heather du Plessis-Allan asked the Prime Minister whether he liked ACT’s suggestion. Luxon replied that, “Suffice to say, Nicola Willis is all over fast-track and considering it in the space around supermarkets and has been for some time. …I don’t want to get ahead of myself, because she has a process she’s following…. We’re up for fast-track.”
It’s encouraging. There is a real problem to solve.
Chapter six of the Commerce Commission’s market study into supermarkets focused on land supply issues that hinder entry.
Councils zone few sites for new grocery retail. Councils often set limits on the number and size of supermarkets that can be allowed in different places, making it hard for a new entrant to find a spot where a supermarket would be allowed.
The situation has not improved since then. Last month, Woolworths spoke out about the nearly decade-long process for getting a new supermarket up in Halswell, a suburb of Christchurch.
Their New Zealand Director of Property, Matthew Grainger, spoke with Chris Lynch Media about their saga.
“In New Zealand, we have very complex planning laws,” Grainger said. “The time it takes to get approval to establish a new supermarket is very protracted. In this case, it took us over four years just to get consent. That’s why we’re supportive of the Commerce Commission’s recommendation to free up planning laws and improve access to retail grocery sites.”
“We’re not singling out a particular party. Our frustration is with the system itself. There are neighbour issues, infrastructure considerations, and a general level of red tape that’s become normal. These delays are not uncommon anymore, and that’s the real problem.”
It took one year and forty-five days to build the Empire State Building. It should not take longer than that to get planning permission to build a supermarket.
And even in places where zoning may not be an issue, consenting can be difficult – for the most absurd reasons.
Resource management commissioners do not like activities that could create “adverse retail distribution effects.”
What’s an “adverse retail distribution effect”? I’m glad you asked!
Imagine that you proposed building a new store – a store so wonderful that everyone in town would shop at your new store rather than the places where they currently shop. The neighbourhoods around those existing stores might suffer because of your competitors’ loss of customers.
That is an “adverse retail distribution effect”.
Avoiding those effects can mean having to prove that there is so much pent-up demand for your kind of store that the existing competitors’ sites would not be harmed. That means commissioning reports from experts who will claim that there are more than enough customers for everyone.
It encourages a type of coziness that is simply terrible for consumers. If the two main supermarket chains agreed with each other to never build a new store unless they were both satisfied that there were plenty of customers for everyone, the Commerce Commission would likely pursue criminal cartel charges against everyone involved. But when that outcome is achieved by planner fiat, the most the Commerce Commission will do is mention it in a chapter of a market study.
Now think about all of this from the perspective of a potential entrant to the grocery sector, coming in from abroad. If even large incumbent supermarkets with extensive experience of the planning systems across dozens of councils still have stores held up for years, with vacant paid-for sites racking up legal bills, there is little chance for outsiders to make a go of things.
Kaufland, part of the German conglomerate that also owns Lidl, gave up its attempt to enter the Australian market in January 2020, pre-Covid. Australia’s “highly restrictive planning laws and lack of development opportunities due to sub-optimal land use zoning” was part of the problem. Kaufland had sunk hundreds of millions of dollars into Australia before cutting its losses.
If Australia’s much larger market was not worth the cost of dealing with Australia’s planning system, New Zealand’s smaller market will be even less attractive unless our planning system changes. Others will know of Kaufland’s retreat from our part of the world.
Visible and credible planning reform is needed if the government wants to enable and encourage real entry.
In late May, the New Zealand Initiative’s Benno Blaschke laid out the framework for the kind of fast-track regime that would break those regulatory barriers to entry. Benno and I also had a New Zealand Initiative podcast explaining how we hoped it might work.
Abolishing regulatory barriers to entry cannot guarantee that a new player will want to enter. But it is needed to make that entry possible. And that threat of potential entry provides competitive discipline.
Not nearly enough developers put up signs like the one at the Wairau PAK’nSAVE, despite also having awful experiences. Getting offside with the local planning department could mean future retaliation.
But I would like a sign at the front of any new store that might follow from any new fast-track for supermarkets. Showing New Zealand can be capable of doing things as fast as New York could in 1930 would be a demonstrable success.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
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