Bayfair retail exodus over rent rises

A group of 10 retailers, ranging from fashion wear to a coffee house, are pulling out of Bayfair Shopping Centre - many of them disillusioned by rent rises of up to 40 per cent.
Those on the move include well-known retailing names: Starbucks, Number 1 Shoes, Living and Giving, Line 7 and Pagani women's fashion, who decided their businesses at Bayfair would become unprofitable in current trading conditions if they accepted the increase.
Bayfair management are busy signing up replacement tenants at the new level of rents, which have become some of the highest of any mall in the country.
Andrew Wadsworth, Bayfair's manager, said it was never nice losing tenants, but the rentals were based on supply and demand. "We have really good retailers wanting to move in.
"We feel the rent rises are justified, but some [retailers] have a different perspective and move on.
"We have to do what is best for the [centre's] owners and investors - and we would be worried if there were vacancies in the mall."
Mr Wadsworth was confident that all the retail space at Bayfair would be filled by November/December "when all the moving around has finished".
Gift store Living and Giving and discounter Number 1 Shoes have already moved out, as have Eves Realty, Bayfair Dry Cleaners and Paint Box nail bar. Brumby's Bakery has closed but will be re-opened by a new franchisee.
Number 1 Shoes and its 12 staff relocated to a new store at Centre Max Retail in Papamoa on July 23. The store manager said the move had a lot to do with the rent.
"It's ticking over quite nicely here."
Starbucks, which has 44 coffee houses around the country, and Pagani, 36 stores, are closing next month, and Line 7 - which has been in Bayfair Mall for six years and is having a massive clearance sale - will be gone by November.
A hairdresser is also trying to sub-lease his space and wants to move closer to downtown Mount Maunganui.
Starbucks is leaving Bayfair on September 15, and its nine staff will be fitted in to owner Restaurant Brands' other Starbucks, KFC and Pizza Hut operations in Tauranga.
A Starbucks spokesman told the Bay of Plenty Times that the Bayfair business faced a substantial increase in rent - the new level would have turned a profitable store in to an unprofitable one based on present trade.
Pagani, which designs and makes all its women's clothing, is closing at Bayfair on September 7, leaving just one Pagani store in Tauranga at downtown Mid-City Mall.
Owner Roger Pagani said he was paying $920/sq m, or $110,400 annual rent, for his 120sq m store at Bayfair, and when he came to renew his lease he was told it would be $1300/sq m - a 42 per cent increase.
After further negotiation, the new rent was reduced to $1050/sq m, or $160,000. On top of that, the retailer pays a $30,000 management fee.
Mr Pagani said he would expect a normal rental increase of 5 per cent, and the rise he faced was "quite bizarre".
"I'm paying less rent at St Lukes in Auckland, and Bayfair has become one of the most expensive malls in the country.
"Saleswise, Bayfair is not in the same league as St Lukes, Manukau and Riccarton shopping centres. I think the rents are a reflection on what the new owner paid for the mall; they paid too much and now they are trying to get a return out of it," he said.
Mr Pagani considered the reduced rental offer, but said in the end it was unrealistic to pay more when the store was earning less and trading was quiet.
"We budgeted for a 10 per cent drop in sales this year. We don't like doing that - some months we were over the budget, but it's hard going there," he said.
Mr Wadsworth said, based on specialty retail sales, Bayfair was in the top-three shopping centres in the country.
He said new retailers were signing up for the space vacated by Starbucks, Pagani, and Living and Giving.
Nevada Denim-Surf-Skate was moving outside the mall near the Countdown entrance to replace Number 1 Shoes, and ANZ Bank was making a similar move, taking up the space left by Eves Realty and the dry cleaners.
Subway is also opening up to complete the food strip outside the centre opposite the open car park area.
Another women's clothing retailer, K and K Fashions, would be moving into the bank's space inside the mall.
"We have two more retailers wanting space, and everything is looking promising," said Mr Wadsworth.
Australian property fund AMP Shopping Centre paid a record $121.5 million in September 2006 for a half share of Bayfair, owning it in conjunction with Tower Asset Management and taking over the management rights.
Since the change in ownership, the Bayfair retailing merry-go-round has seen the likes of Canterbury leisurewear, women's fashion George Edward and Ezi-print Kodak Express leave, and other well-known brands such as Burger Fuel, Esquires coffee, jewellers Stewart Dawsons and Silvermoon, and clothing firms Cotton On, Esprit, General Issue, Millers and Tarocash move in.