Taupo's central business district is constricted by the river and the lake. Photo / Aerial Imagery
Retail space in Taupo's CBD is almost as scarce as the proverbial hen's teeth.
Bayleys Research, in its latest overview of the central North Island town's commercial and industrial market, says its central business district has almost no vacant space.
Tenants have to pay premium rents to be located in the most frequented areas, the review says.
"The lack of available space has highlighted the need for further alternatives to be made available to retailers in order to alleviate the pressure that is already mounting from a CBD that is constricted by the river and the lake," says Bayleys Taupo managing director Elaine Westerman.
One such alternative is the proposed redevelopment of retail premises in the CBD fringe on the corner of Titiraupenga St and Heu Heu St when current leases expire next year. The development is expected to include underground parking to reduce the pressure created by the lack of carpark spaces in the CBD.
There has also been some development of large-format type retail space at the Totara Point Business Park.
This has attracted tenants such as Danske Mobler and Homeworld, with 100 per cent Electric moving to the premises in July, due to a lack of expansion possibilities within their current accommodation and more competitive rents than the CBD.
The proposed Stage Four development of ground floor retail and office space above should help to alleviate some of the pressure on retail space in the short to medium term, says Westerman.
"However, evidence suggests consumer requirements for an amalgamated bulk retail site, similar to those developed in a number of other locations around the country, are currently not being met," she says.
In order to provide some direction on this issue the Taupo District Council prepared The Taupo Large Format Retail Discussion Document.
This report provided clarification on the key issues that needed to be addressed and a number of options recommended.
But Westerman says further action and decisions are required in order to provide developers, retailers and consumers with a conclusive and favourable outcome.
Bayleys Research says the Taupo retail investment market continues to perform strongly, with vigorous competition for the few retail properties that do come up for sale.
This is especially true for retail premises in the CBD which generate a lot of interest and competition when offered for sale.
One such is Deli 21 at 34-40 Horomatangi St. The 141 sq m premises sold at a Bayleys Taupo auction this year for $730,000 at a yield of 6.3 per cent.
The lack of suitable office space and vacant land for further development in Taupo's CBD has also provided the catalyst for a robust office sector, says Bayleys Research.
Owners are now focusing on refurbishment as a strategy to alleviate the pressure brought about by a lack of vacant quality space and limited development options.
Several refurbishments of older space within the CBD have been done in the past 12 months to satisfy the needs of prospective tenants and to attract higher rentals. Westerman says well located, newly refurbished office space in the CBD is attracting high levels of leasing inquiry similar to that of top-quality space.
For instance, the first floor of the old Le Pine & Co building at 4 Horomatangi St, vacant for almost 12 months, has been leased to Cheal Consultants. The landlord and tenant shared the cost of a significant refurbishment and a favourable lease for both parties was concluded, says Westerman.
Premises vacated by Cheal Consultants at 70 Ruapehu St have subsequently been refurbished and chartered accountancy firm Strettons has expanded into more than half of the space. The rest, converted into smaller offices, has leased up quickly.
Strong demand has pushed CBD office rents up and they now range between $180 and $300 a sq m, says Bayleys Research.
The paucity of appropriate office space in the CBD has also had a flow-on effect to premises on the CBD fringe, which has experienced an increase in leasing activity and rents over the past 12 months. Annual rentals for CBD fringe properties now range between $120 and $230 a sq m.
Bayleys Research says the industrial sector in Taupo has been bolstered by the development of the Taupo Motorsport Park and the number of motor racing-related industries that have set up business to accommodate the A1GP and other races throughout the year.
Recent confirmation the A1GP is to be held in Taupo once again should continue to bolster the light industrial sector of the market, says Westerman.
The industrial area at Rakanui Rd near the motorsport park continues to receive good leasing inquiry with owner-occupiers also taking space.
Several firewood businesses as well as specialists in roading and earthmoving now operate in the area, with distribution companies also attracted to the central location that Taupo provides as a distribution hub.
The latest Tourism Research Councils forecasts indicate that Taupo's tourism sector, a big component of the town's commercial and industrial property market, is set to expand further over the next few years with the total number of visitors to the Taupo District expected to reach 3.81 million by 2012, up 11 per cent on 2005.
This is expected to increase visitor spending over the same time by about 33 per cent to $478.3 million.
Looking to grab their own slice of this forecast increase has been Auckland Central Backpackers, which is leasing the old Taupo Central Backpackers premises at 7 Tuwharetoa St after its extensive redevelopment and refurbishment.
Bayleys Research says an emerging trend is the conversion of motel units into serviced apartment accommodation. An example of this is the complex at 300 Lake Terrace at Two Mile Bay. The apartments are for sale as fully self-contained apartments and range in price from $395,000 to $625,000, with five of the 24 units already sold.