Tauranga's strong economy is spurring office and suburban retail developments. Photo / Supplied
Tauranga's strong local economy has seen demand for office space rise across all quality grades and sizes over the past 12 months, along with a new low industrial vacancy rate and a surge in suburban retail development.
"The demand for office accommodation has triggered a supply response from developers - with increasing amounts of prime space coming onto the market," says Goran Ujdur, Bayleys Research analyst.
Announcing results of Bayley's new Tauranga research, Ujdur says the increased demand will, in the short term, see an additional 5000sq m of better quality new and refurbished space available for lease.
"As a result, prime rents have softened marginally over the past year and are expected to run flat until this space is absorbed over the next year," he says.
Recent Tauranga completions include: a new $40m, 7800sq m five-level office and retail complex on the corner of Third Avenue and Cameron Rd which is about 50 per cent leased; and a new $4m 2400sq m three-level building on Second Avenue housing Employment NZ and the Avonmore Tertiary Institute.
Major refurbishment and building programmes are also underway at the five-level, 2750sq m South British House at 35 Grey St; and on the corner of Harrington and Willow Sts where a new $10m two-level retail and office complex named The Reserve is under construction.
In the industrial property sector, Bayleys Research notes that conditions remain tight across all the major industrial areas.
For May, the overall vacancy rate dropped to a low of 4.4 per cent - down from 5.2 per cent in the same period last year.
"Mt Maunganui's industrial precinct is dominated by port-related activities, and with container volumes expected to exceed one million units in the current financial year, more space in the precinct is being used for container storage," Ujdur says
"Increasingly land which the port authority previously leased to external businesses is being progressively taken back for its own logistics and distribution purposes. As a result, vacancies are expected to continue to remain very tight.
"Further growth in Papamoa's industrial area is likely to be limited by the encroachment of residential development. Being so close to Papamoa Beach, many developers are clearly taking the view that the highest and best use for surrounding land is residential."
The Bayleys data notes that industrial rents in and around Tauranga have generally remained stable over the past 12 months.
"By comparison Mount Maunganui retail rents continue to record solid growth underpinned by both local and tourist/cruise ship trade."
Ujdur says Tauranga's residential subdivision boom is driving a surge in suburban retail development.
"The largest of these includes Stage One of the Tauranga Crossing which opened in September last year and totals 17,000sq m of retail space with anchor tenants like The Warehouse, Warehouse Stationery, Noel Leeming and Pak'nSave.
"Construction of the next stage totalling a further 27,000sq m of space will commence later this year and is expected to include an enclosed mall, new dining amenities, and an entertainment arena with an Event Cinema complex.
"Across the road from the 11ha Tauranga Crossing site is a 6ha site which the same owners are developing into a 23,000sq m large format retail complex called The Depot.
"The focus there will be on home and lifestyle - with completion expected late 2017. Ultimately all stages of this ambitious regional centre will be underpinned by a local workforce of 5000 people and The Lakes residential estate which will eventually be home to 7000 people."
Ujdur says other recently completed shopping centres include the $12m Pyes Pa retail centre on Pyes Pa Rd; the 1315sq m Mount Central development in central Mount Maunganui; and upgrades for shopping hubs at Bethlehem and Papamoa.
However, it's a different story in Tauranga's CBD in the short and medium term.
"Retail rents remain relatively flat in the city - with a similar pattern expected over the next 12 months. Recent supply increases in a number of suburban centres will likely put a cap on rental growth until more space is absorbed," says Ujdur.
There is some positivity for the CBD though - although not for at least 24 months.
"Tauranga's CBD retail landscape is set to change over the next few years with the completion of the Waikato campus, upgrading and development of a number of council facilities, and growth in inner city apartments.
"The owners of the Farmers Department Store on the corner of Elizabeth St and Devonport Rd have purchased a number of surrounding sites and are planning a major consolidated development to showcase the new format Farmers and other retailers in the stable - including Stevens Homeware, Whitcoulls and Pascoes.
"It is anticipated that the project will take at least two years to develop and may also include apartments on the upper levels."
