Landlords in the CBD are brokering deals says David Schmidt from NAI Harcourts Rotorua. Photo / Andrew Warner
Landlords in the CBD are brokering deals says David Schmidt from NAI Harcourts Rotorua. Photo / Andrew Warner
Landlords are brokering special deals, including rent-free periods, to fill shop vacancies in Rotorua's struggling CBD.
In contrast, the demand for industrial properties has grown, with values soaring, rents rising and slim vacancy pickings.
David Schmidt, from NAI Harcourts Rotorua, the business's commercial arm, said the leasing market had changedconsiderably in the last three years.
"We have seen a reversal of times past where quality office and retail space was sought after and industrial space was abundant. Finding large retail tenants now has become more challenging with the increase of e-commerce or online shopping, partially due to Covid-19 being a contributing factor."
He said there would be some failures and further dislocation.
Landlords in the CBD were being creative to attract and keep tenants.
"Whether it be Covid relief, stepped leases, operating costs being deferred or diminished or rent-free periods."
Schmidt had seen small start-up businesses emerge while industrial had shown strong growth, with rent increases and lowering yields resulting in some significant increases in value.
He said tourism and CBD assets were likely to continue their struggles while industrial was likely to outperform, particularly where it surrounds new infrastructure developments.
Bayleys Rotorua commercial and industrial agent Mark Slade. Photo / Supplied
Bayleys Rotorua commercial and industrial agent Mark Slade said the leasing market was diverse in nature, especially in the CBD.
"There is obviously a sector of the market more affected by Covid than others, specifically those businesses that are or were heavily reliant on foreign tourism. Local and domestic-based businesses are doing very well on the back of strong domestic spending as Kiwis continue to spend at home rather than abroad."
The business vibe continued to be more vibrant than the same time last year and he had noticed a slightly higher uptake of recent vacant spaces.
"There is now more certainty around how we handle Covid moving forward. The industrial sector has performed increasingly well over the past two years, with few leasing opportunities available."
Bayleys branch manager Beth Millard said rental rates ranged from $70 per sq m to more than $200 per sq m depending on the age of the building, stud heights, showrooms, offices and other amenities including yard space, parking wash down facilities, he said.
Average yields ranged from a low five per cent to eight per cent, also depending on variables "a discerning buyer would consider when purchasing a commercial or industrial investment property".
Rotorua Mayor Steve Chadwick. Photo / NZME
Rotorua mayor Steve Chadwick said the council's vision for the inner city had always included residential and commercial development to bring more vibrancy and support businesses.
"Our critical housing shortage makes this even more important now. Housing, revitalising our CBD and safety are key pillars of our 2021-31 Long-term Plan."
There was a lot of up-front work needed to inform an overall plan for the inner city and the various pieces that would provide the basis for its plan were being progressed.
She said Rotorua Economic Development was in the process of seeking partners who wanted to support inner-city living aspirations.
District Development deputy chief executive Jean-Paul Gaston. Photo NZME
District development deputy chief executive Jean-Paul Gaston said there was a good level of interest and ideas from both local and out-of-town developers.
"We are now undertaking due diligence and assessing the expressions of interest received."
Retail NZ chief executive Greg Harford said a rent increase in the current climate could be disastrous for a retail business.
"Many retail businesses are facing a bleak and uncertain future, and are really suffering from a drop in consumer spending and big increases in the costs of goods, freight and utilities."
Restaurant Association NZ chief executive Marisa Bidois said businesses were already struggling and not trading at full capacity.
Revenue was reduced by 30 to 60 per cent at levels 3 and 4 and 20 to 45 per cent at level 2.
She said it was an unreasonable time to be implementing rent increases, considering there was so much pressure on hospitality.
"Our preference is for landlords to take a long-term view and work with their tenants during these challenging times. We have definitely had discussions with members who have been in rent arrears and they are working through this with their landlords."
Lots of landlords had stepped up and were being reasonable but not everyone has done that, she said.
Last month the Government introduced new rules to help ease the impact of Covid-19 restrictions on commercial tenancies.
A clause has been added to the Property Law Act, which said commercial leases require a 'fair proportion' of rent to be paid where a tenant has been unable to fully conduct their business in their premises due to Covid restrictions.
Justice Minister Kris Faafoi said when tenants and landlords could not agree on the fair proportion, they could go to arbitration.
"This change helps to ensure that landlords and tenants come to reasonable agreements about rent obligations, while still respecting agreements that have already been made."
