Commercial rents drop in Rotorua CBD as shops empty: 'Retail is a tough gig'

The Rotorua CBD is trying to revitalise itself for the future but the number of empty shops is raising concerns. Carmen Hall reports on how some landlords are tackling the problem and delves into the council's vision for the city centre.

Landlords are dropping rents in Rotorua's city centre to attract more businesses with one tenant paying 40 per cent less than 15 years ago - but the number of empty shops appears to be climbing.

The mayor says the council is focused on creating a vibrant CBD despite concerns raised by Rotorua Chamber of Commerce members about the state of affairs.

TelferYoung registered valuer Grant Utteridge said by his estimation there were more empty CBD shops compared with the 59 reported in its yearly 2018 December survey.

''In my view, the vacancy rates have got worse. My gut feeling is the number of shops would have gone up slightly.''

But Utteridge said it was not a problem isolated to Rotorua and was being felt around the country.

''Retail is a tough gig and other places are facing the same challenges. Retailers just can't afford to pay more rents.''

As an example, Utteridge knew of a shop recently let on Main St that was only paying 60 per cent of what the rent was 15 years ago.

According to the valuer's June Rotorua Market Insight Report, prime CBD prime retail shop leases on Main St were fetching from $250 to $400 per sq m. Commercial office space was about $190 to $280 per sq m and industrial $100 to $140 per sq m.

Utteridge said it was not an easy fix as the retail landscape had changed with online shopping and box stores.

Professionals McDowell Real Estate commercial salesperson Nadia Christensen said landlords in the CBD were reducing rents and giving healthy "rent-free" periods and shorter initial terms to help tenants get established.

She said despite the number of empty shops there was still interest from locals and people outside Rotorua who valued the lifestyle.

"Landlords that are happy to be negotiable and fill their spaces seem to have success in doing so. There are a few very proactive landlords around town that are just happy to have a 'bum on a seat' and are wise as they are comfortable giving new businesses and tenants a go.

"They are aware that having someone in their building is better than leaving it empty as the spaces can only be improved."

Returns on investment ranged from 12 per cent or more but depended on supply and demand.

Read more:Rotorua CBD businesses speak out about threats, abuse and being afraid

''Overall, there is buoyancy in the market with excellent new projects under way including the new five-star hotels being built.''

Colliers International Rotorua commercial and industrial sales and leasing broker Mathew Gibbard said there was good demand from high-end commercial tenants, with several government agencies looking at expanding to take more space.

There was also interest from food and beverage operators, looking to be on or near Eat Streat, he said.

CoreLogic data showed about 10 sales of commercially zoned properties in CBD this year compared with 33 in 2018 and 28 in 2017.

''We have had good interest in properties, especially office and accommodation, that have gone through the sales process,'' Gibbard said.

Read more: Retail owners fear Rotorua CBD is turning into a ghost town

''There are good leasing opportunities to be had in the CBD, especially given the demand for A-grade office space which meets the building code in terms of earthquake resilience.

''There is demand and no supply.''

Gibbard agreed more foot traffic would improve retailer performance.

''Retail centres like that at Mount Maunganui have done well with offerings from smaller independent retailers, and I certainly think it is possible in Rotorua.''

Mayor Steve Chadwick said the council's vision has always been for a vibrant and diverse inner-city that attracts business, activity and people.

A lot had been done but there would always be more to do and the council would not stop working on it, she said.

"To date, we've improved intersections, installed art, increased CCTV and lighting, established inner-city markets, revamped the CBD heart (Te Manawa) and Jean Batten Park, established Eat Streat, worked with others to have inner-city entertainment and events and partnered with police around safety."

What's next would be discussed this year as part of setting priorities for the triennium, she said.

Councillors visited the CBD as part of the induction programme to better understand the challenges and factors to be considered in decision-making.

"Opportunities for more inner-city living is identified in our spatial plan and exploring ways to incentivise CBD development, building improvements and conversion to inner-city living will be part of the Rotorua housing plan the council is developing alongside government agencies, iwi and others."

Read more: Rotorua businesses weigh in on potential rates relief as more vacant shops appear around the CBD
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'bullies, thugs and drug dealers' are ruining Rotorua CBD

'A hell of a lot of CBD concerns'

Drug dealers, gangs, homeless people, public safety and empty shops have been red-flagged as ongoing issues by businesses in the CBD.

Rotorua Chamber of Commerce chief executive Bryce Heard said there were ''a hell of a lot of concern about the state of the CBD'' raised by members.

"They are concerned about the number of empty buildings, they are concerned about the number of homeless people, they are concerned about drug dealing, they are concerned about public safety, they are concerned about the impact on tourism and they are concerned about where some of the homeless are being housed and the impact on values of properties."

Heard said while there was a lot of goodwill to find solutions and people were looking to the council to provide the lead, the situation was like a leaking iceberg.

"The water is running out of the bottom and you see the water coming out of the bottom but you can't see what is going on up the top.

"There is a whole lot of things happening up there and they are deep policy issues. There is family issues and things like crime and drug dealing and family violence and all sorts of things there that we can't see publicly.

"But what we see are the effects of it downstream."

On the upside, there were positive developments including three new hotels and the Eat St precinct was a wonderful success, he said.