For lease signs hint at tough trading

01:10, Apr 10 2013
Office Max
AVAILABLE: The former Office Max building in Trafalgar St is vacant.

As winter approaches, Nelson's CBD has several unused retail buildings, some sitting empty for months, with earthquake strengthening, online sales and large fixed costs blamed.

But real estate professionals say there is plenty of work going on behind the scenes, and the outlook is not as bleak as appearances suggest.

A quick walk around the central city turned up about a dozen empty shops, many with "For Lease" signs on the street frontage.

Some, like the Hardy St property formerly occupied by Pomeroy's Coffee and Tea Company, have sat unused for nearly 18 months.

Across the road, the former Guthrie Bowron building, a spacious retail property, also sits empty. It will soon be taken over by Fight Club Nelson.

Last week three national retailers announced their Nelson branches would close, with one owner saying Nelson was a national anomaly for an otherwise successful business, and that Nelsonians were not coming into town.


Nelson Chamber of Commerce chief executive Dot Kettle said without doing analysis, her feeling was that there were more empty buildings than this time last year.

"I guess because in the middle of winter you really can look down Trafalgar St sometimes and you're lucky to see anybody on the street. There's no doubt retail is doing it tough."

Some vacancies were because of earthquake strengthening work, which made it harder for landlords to attract new tenants, she said.

The rent charged by landlords would only increase as the requirements in terms of earthquake strengthening came on-board.

"So I think there's a nervousness and apprehension. [Rents] are always going to be higher than retailers would like."

The increase in online sales had also been a factor, as had the commercial rate levy for inner-city businesses.

But there were also positive developments, such as the arrival of K-Mart in Richmond, she said.

Bridge St Collective founder Galen King said he had seen an increase in demand for self-contained offices, and he was looking at converting some of the open-plan desk spaces into partitioned offices. Using a co-working space cut down on expensive fixed costs like insurance, rent and rates for smaller businesses, he said.

Colliers commercial broker Geoff Faulkner said outward appearances were deceptive, and there were actually fewer vacancies than normal for this time of the year, but more "For Lease" signs because new brokers had moved into town.

There was only one vacant site in Trafalgar St, the old Office Max building that was a large site that would need a major national retailer to fill, but there was "plenty happening in the background".

One Bridge St property was empty, but the landlord was still getting rent, so was in no hurry to fill it, he said.

The Pomeroy's and Guthrie Bowron buildings on the intersection of Hardy St and Rutherford St were only remaining vacant because the landlords would only lease to a "suitable" tenant, he said.

"The owner's not in a position where he has to jump up and down and grab the first guy that passes through the doors."

He had personally shown three national retail tenants around the city last week, and his main problem had been a lack of property to show them.

Office vacancies were a bigger problem, with thousands of square metres of office space up for lease, mainly due to the recession and the reduction in government expenditure.

The Bridge St Collective had dragged people into town that would not have had an office otherwise, but they would not have leased a building otherwise, he said.

Summit commercial and industrial specialist Bevan Dixon said there were certainly more buildings for lease, but it was probably at much the same inquiry level as previous years, and there was activity in the market.

"From a shopper's point of view they look at it and think, ‘crikey, business must be hard', but I think that opens it up."

Appearances were misleading, he said.

"It looks from the outside like the market's changing, and there's a lot of empty space. Yes there is, but don't ever forget that the extra space has been gained in the last few years, with Richmond and Fashion Island and all these retail spots that have opened up."

Owners were looking for the right deal, and were not prepared to reduce their rent.

"In some cases they are happier to leave them empty than they are to fill them at a lower rental."

Business confidence had not been good, but had shown encouraging signs recently, and he expected winter to continue on that trajectory.

Earthquake strengthening would affect the market, but only when businesses came to the end of their leases, he said.