Business confidence in Rotorua's industrial sector appears to be on the rise, with the lowest level of vacant industrial buildings since 2004, according to figures released by TelferYoung Rotorua.
But while that was a good indicator of business confidence, the lack of space could result in potential lost business development opportunities, TelferYoung director Kendall Russ warns.
The annual survey shows the overall level of industrial vacancies fell in the past 12 months from 7.2 per cent to 6 per cent.
It continued the general trend of declining vacancies since 2011, except for a spike in 2014 when the Tachikawa mill went into liquidation.
"We're seeing confidence both in the industrial property market and the industrial sector," Mr Russ said.
"In the last six to 12 months we've had clients that have either relocated to bigger premises, or expanded their own buildings."
Mr Russ said both west Rotorua and main road locations had shown improvement over the past 12 months, but he warned there were limited options for new business developments, or for current businesses to expand.
"We are hearing of a number of businesses seeking good-quality, high-stud, clear-span workshop space capable of holding gantry cranes.
"But there is just none of this space available to lease or purchase.
"In particular, there is a distinct shortage of vacant sites available near the CBD.
"There is space out by Rotorua Airport but in general companies want to be closer to the city centre," he said.
"This could result in potential lost business development opportunities."
However Rotorua Lakes Council said there were significant areas of land zoned industrial in the Rotorua District Plan, which had recently become operative.
Group manager strategy and partnerships Jean-Paul Gaston said recent work done by the council had identified a shortage of industrial sites ready for immediate development.
While there was enough increasing interest from developers to subdivide, it was up to them to respond to market demand by actually making sites available, he said.
"However, we recognise we may need to work with developers to provide additional choices by rezoning some additional areas but there is a balance to be struck and we need to be careful about where any new industrial areas are allowed, particularly near residential areas."