Insurers already rate Wellington a far higher risk than Auckland, with commercial landlords in the capital facing a stiff excess of 5% of the sum insured. Photo / Mark Mitchell
Insurers already rate Wellington a far higher risk than Auckland, with commercial landlords in the capital facing a stiff excess of 5% of the sum insured. Photo / Mark Mitchell
Wellington City Council is being called on to review its rating system over fears high costs are driving investment out of the capital and dragging down an already struggling local economy.
Newly released figures show Wellington’s average commercial rates bill is $47,881. That compares to $20,716 in Auckland, $18,059 inChristchurch, $24,768 in Hamilton, and $25,670 in Tauranga.
The disproportionately high cost has raised concern with the Wellington Chamber of Commerce, which has long advocated for Wellington’s commercial rates differential to be lowered to bring it in line with other centres.
Wellington Chamber and Business NZ CEO Simon Arcus told the Herald the figures are a “real worry”.
“The difference is stark, and when you start to look at an average like that, you consider is it going to be interesting and worthwhile doing business in Wellington for that big a difference in the average rates?”
Insurers already rate Wellington a far higher risk than Auckland. Photo / Mark Mitchell
Arcus said the Chamber’s analysis shows Wellington businesses are paying about 48% of the city’s rates burden, compared with Auckland and Canterbury where that number is closer to 30%.
He said commercial property owners pass the added cost on to leaseholders which makes rents more expensive for operators.
“For one, it does drive business choice, so people say ‘well, I might go to another city where my costs are going to be better’.
“Two, there’s opportunity cost, we don’t know what people aren’t choosing to do in the city. But three, there’s also investment choices if you are faced with uncertainty and you’re in a city that is very expensive, you become less confident about investing in the city and developing”, Arcus said.
He believes there’s “no question” the costs from high commercial rates would’ve contributed to the recent spate of business closures in the capital.
Wellington Chamber of Commerce chief executive Simon Arcus. Photo / Supplied
Last month Cuba St burger joint Ekim Burgers announced it was closing due to losing its lease, with the owner telling the Herald “prohibitive” rental costs were to blame for not being able to set up elsewhere.
Ekim is the latest in a long string of hospitality venues to shut up shop in the capital over the past year, each crediting a myriad of factors.
“Those extra costs can tip you over the edge [...] we know that some of these businesses are really struggling”, Arcus said.
A property with the same value in Wellington will pay about twice as much in rates as in Auckland.
On average, Auckland council rates for commercial land use are 0.72% of the building’s Capital Value. In Wellington, this is 1.5% for both city and regional council rates.
The value of rates charged for each property is established using a differential system, wherein properties are charged differently depending on their category of land use.
Residential properties are charged a “base differential”, with commercial, industrial, and businesses charged at a different ratio.
In 2023, Wellington City Council officers agreed the city’s commercial rates differential was too high, recommending it be brought down from 3.7:1 to 3.25:1.
That proposal was voted down by councillors.
Council officers said at the time that Wellington City Council “currently charges the highest Commercial differential” of all comparable metro councils.
The council’s chief strategy and finance officer Andrea Reeves said the council reviews the rating system annually and will continue to do so as the council works towards the 2027 Long Term Plan.
Reeves acknowledged the issue of high commercial rates was something that had come up in discussion with the chamber and other key stakeholders.
“I have heard from them about how it is shaping their decision making.
“It is a problem for them”, Reeves said, although noted she does not hold a direct engagement role with Wellington businesses in her position, “it’s just anecdotal”, she said.
“If they’re keen for that change the conversation needs to be had with those that are elected to our Governing body.”
Arcus said the council and community need to work harder to encourage business in the capital and “connect the idea of prosperity with business”.
“I think the issue is, people have really not looked at the fact that we are paying far more than anywhere else for commercial rates - and it is going to impact Wellington as an attractive city.”
Ethan Manera New Zealand Herald journalist based in Wellington. He joined NZME in 2023 as a broadcast journalist and is interested in local issues, politics and property in the capital. Ethan can be emailed at ethan.manera@nzme.co.nz.
