Rotorua District CouncilRotorua District CouncilRotorua...

COMMERCIAL IN CONFIDENCE Errors & Omissions Excepted

Rotorua District CouncilRotorua District CouncilRotorua District CouncilRotorua District Council

Economic Impacts of City FocusEconomic Impacts of City FocusEconomic Impacts of City FocusEconomic Impacts of City Focus

FINAL FINAL FINAL FINAL REPORTREPORTREPORTREPORT

by McDermott Miller by McDermott Miller by McDermott Miller by McDermott Miller StrategiesStrategiesStrategiesStrategies

19 December 201419 December 201419 December 201419 December 2014


Rotorua District Council: Economic Impacts of City Focus © McDermott Miller, 19 December 2014)

CopyrightCopyrightCopyrightCopyright

McDermott Miller Limited is the author of this report and holds all copyright and intellectual property rights relating to it. The report, or any part of it, may not be reproduced in any form or communicated to any other person or corporate body without the prior written approval of McDermott Miller Limited. McDermott Miller Limited requires that all parties permitted to use the report and the research contained within it give full and correct acknowledgement of authorship.

McDermott Miller Limited, Strategy Consultants CPO PO Box 629 Wellington New Zealand

2nd Floor 90 The Terrace Wellington Telephone (04) 471-8500

Email [email protected] www.mcdermottmiller.co.nz



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TABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTS

EXECUTIVE ASSESSMENTEXECUTIVE ASSESSMENTEXECUTIVE ASSESSMENTEXECUTIVE ASSESSMENT 1111

BRIEF 1

1111 INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION 5555

1.1 Commission 5

1.2 CBD retailing over time 5

2222 EFFECTS OF CITY FOCUEFFECTS OF CITY FOCUEFFECTS OF CITY FOCUEFFECTS OF CITY FOCUSSSS 10101010

2.1 The rationale for development of City Focus 10

2.2 Events in City Focus 11

2.3 manifestations of Retail Decline in vicinity of City Focus 12

2.4 How successful has City Focus been? 18

3333 FUTURE PROSPECTSFUTURE PROSPECTSFUTURE PROSPECTSFUTURE PROSPECTS 19191919

4444 CONCLUCONCLUCONCLUCONCLUSION AND RECOMMENDATSION AND RECOMMENDATSION AND RECOMMENDATSION AND RECOMMENDATIONSIONSIONSIONS 22222222

4.1 Conclusion 22

4.2 benefits of co-ordinated management of cbd retailing 25

4.3 Recommendations 25

ANNEXURESANNEXURESANNEXURESANNEXURES (published separately)

ANNEX I ANNEX I ANNEX I ANNEX I :::: PLANS AND MAPSPLANS AND MAPSPLANS AND MAPSPLANS AND MAPS

ANNEX II: ANNEX II: ANNEX II: ANNEX II: ACTIVITY IN THE VICIACTIVITY IN THE VICIACTIVITY IN THE VICIACTIVITY IN THE VICINITY OF CITY FOCUS INITY OF CITY FOCUS INITY OF CITY FOCUS INITY OF CITY FOCUS INDICATED BY PEDESTRNDICATED BY PEDESTRNDICATED BY PEDESTRNDICATED BY PEDESTRIAN COUNTSIAN COUNTSIAN COUNTSIAN COUNTS

ANNEX III:ANNEX III:ANNEX III:ANNEX III: TRENDS IN RETAIL SUPTRENDS IN RETAIL SUPTRENDS IN RETAIL SUPTRENDS IN RETAIL SUPPLY INDICATED BY OCCPLY INDICATED BY OCCPLY INDICATED BY OCCPLY INDICATED BY OCCUPANCY/VACANCY DATAUPANCY/VACANCY DATAUPANCY/VACANCY DATAUPANCY/VACANCY DATA

ANNEX IV:ANNEX IV:ANNEX IV:ANNEX IV: VALUE OF PROPERTIESVALUE OF PROPERTIESVALUE OF PROPERTIESVALUE OF PROPERTIES

ANNEX V:ANNEX V:ANNEX V:ANNEX V: TRAFFIC FLOWSTRAFFIC FLOWSTRAFFIC FLOWSTRAFFIC FLOWS

ANNEX VI:ANNEX VI:ANNEX VI:ANNEX VI: ROTORUA CITY FOCUS SROTORUA CITY FOCUS SROTORUA CITY FOCUS SROTORUA CITY FOCUS STREET VIEWSTREET VIEWSTREET VIEWSTREET VIEWS



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LIST OF EXHIBITSLIST OF EXHIBITSLIST OF EXHIBITSLIST OF EXHIBITS

Figure EA1.1: City Focus “Shared Space” Concept 4

Table 1.1: Timeline of Retailing Changes in the Rotorua CBD 7

Figure 1.1: Timeline of CBD and Central Mall Comparison Retail Sales (Constant 2013$) 9

Figure 2.1: Four Year Moving Average Pedestrian Counts – Tutanekai Street 12

Figure 2.2: Proposed Precincts of the Rotorua Inner City (also see Figure A1.2) 13

Figure 2.3: Occupied Comparison Retail Space - Tutanekai Street by Block 14

Figure 2.4: Total Occupied Comparison Retail Space - Hinemoa Street by Block 15

Figure 2.5: Average Value of Tutanekai Street Properties by Block North to South as at March 2014 16

Figure 2.6: Average Value of Hinemoa Street Properties by Block East to West as at March 2014 16

COMMERCIAL IN CONFIDENCE

Errors & Omissions Excepted


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EXECUTIVE ASSESSMENTEXECUTIVE ASSESSMENTEXECUTIVE ASSESSMENTEXECUTIVE ASSESSMENT

BRIEFBRIEFBRIEFBRIEF

McDermott Miller was commissioned by Rotorua District Council in October 2014 to assess the economic impacts of City Focus on Rotorua’s Inner City as it currently stands and under two “re-development” scenarios. We have assessed the current and future economic impacts of three options for “reconfiguring” City Focus:

Option AOption AOption AOption A: No Change;

Option BOption BOption BOption B: Removal of the sails and central pillars on Tutanekai Street and reconfiguring City Focus as proposed in the City Focus “Shared Space” concept drawing (refer Figure Figure Figure Figure EA1.1 and A1.1)EA1.1 and A1.1)EA1.1 and A1.1)EA1.1 and A1.1); and,

Option COption COption COption C: Removal of City Focus.

ConclusionConclusionConclusionConclusion

In our view, removal of the sails and pillars of City Focus and reconfiguring its traffic flows has potential to make a modest positive contribution to revitalisation of Rotorua’s CBD, as a component of a package of Council and Inner City Focus Group initiatives. It will help implement the City Revitalisation Strategy of “Strengthening the Spine” of the CBD, Tutanekai Street from Eat Streat in the North to Amohau Street in the South.

It is important, however, to recognise such impacts are minor compared to the challenges to retailing across Rotorua’s CBD from continuing loss in real spending power by shoppers and retailers attracted to Central Mall.

The upgrade of City Focus and other streetscape improvements will help improve what is already a pleasant urban environment. But no amount of streetscape improvements will achieve revitalisation unless the retail offer in Tutanekai Street itself improves.

Potential impact of reconfiguring City Focus (Option B)Potential impact of reconfiguring City Focus (Option B)Potential impact of reconfiguring City Focus (Option B)Potential impact of reconfiguring City Focus (Option B)

1. Increased Traffic Movements along Tutanekai and Increased Traffic Movements along Tutanekai and Increased Traffic Movements along Tutanekai and Increased Traffic Movements along Tutanekai and Hinemoa Hinemoa Hinemoa Hinemoa StreetStreetStreetStreet: : : : Under Option BOption BOption BOption B traffic flows along Hinemoa Street and Tutanekai Street would increase, but less than with full removal.

2. Increased pedestrian movement: Increased pedestrian movement: Increased pedestrian movement: Increased pedestrian movement: Combined with the new time-limited free parking policy, the increase in traffic could be expected to result in an increase in pedestrian activity. The improvement in sightlines could also have a positive effect on pedestrian activity along the length of Tutanekai Street. Introduction of “barn dance” crossings in the intersections of Tutanekai Street with Amohau Street and Eruera Street would contribute to free pedestrian movement to and from Central Mall. Pedestrian movement in City Focus would increase if




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provision is made for a layby near Amohau Street where cars can stop briefly to drop off or pick up shoppers.

3. Increased sales: Increased sales: Increased sales: Increased sales: Modest increased traffic and pedestrian activity, combined with the other environmental upgrades already in place and planned, can be expected to increase retail sales in the putative “Boutique Precinct” of the CBD. Rotorua District Council’s relocation of CBD services to 1251 Tutanekai Street will contribute to this.

4. Effect on private sector investment: Effect on private sector investment: Effect on private sector investment: Effect on private sector investment: Crucial to a sustainable improvement in the CBD is an improvement in quality of the retail offering, including an upgrade of the buildings. This will not necessarily follow on from reconfiguration of City Focus. Anecdotally, completion of “Eat Streat” has not yet led to investment/upgrading of the businesses alongside it and this may also be the case with reconfiguration of City Focus. Reconfiguration of City Focus is a “necessary”, but not “sufficient” condition for this to happen.

Impact of complete removal of City Focus (Option C)Impact of complete removal of City Focus (Option C)Impact of complete removal of City Focus (Option C)Impact of complete removal of City Focus (Option C)

1. Increased Traffic Movements along Tutanekai and Hinemoa Streets: Increased Traffic Movements along Tutanekai and Hinemoa Streets: Increased Traffic Movements along Tutanekai and Hinemoa Streets: Increased Traffic Movements along Tutanekai and Hinemoa Streets: Traffic modelling work undertaken for us by RDC engineers indicate that traffic flows along Hinemoa Street would greatly increase; but there would only be a small increase in absolute terms in traffic along Tutanekai Street.

2. Whether Whether Whether Whether complete removal of City Foccomplete removal of City Foccomplete removal of City Foccomplete removal of City Focusususus provides a bigger boost for retailing in the CBD than provides a bigger boost for retailing in the CBD than provides a bigger boost for retailing in the CBD than provides a bigger boost for retailing in the CBD than reconfiguring is problematicreconfiguring is problematicreconfiguring is problematicreconfiguring is problematic. It depends on the balance of two factors: optimising the accessibility of the CBD for car-borne household shoppers, which is supported best by complete removal, versus providing a better quality urban environment which will attract foot-borne tourists as well as residents and act as venue for small events. In the absence of shopper survey information it is a matter of judgement what the optimum balance should be. The observed existing pattern is for tourist activity to concentrate in the northern CBD – the Entertainment Precinct - and in Fenton Street in and near the Haupapa Street Precinct. Resident shoppers, in contrast, concentrate in the southern “Boutique Precinct” near to Rotorua Central Mall. The Council should build on this differentiation rather than seek to counter it. Complete removal of City Focus therefore should be considered seriously.

Limitations Limitations Limitations Limitations ofofofof Reconfiguring City Focus Reconfiguring City Focus Reconfiguring City Focus Reconfiguring City Focus

Removal of the sails and pillars of City Focus and reconfiguring its traffic flows would be a modest but positive step towards revitalisation of Rotorua’s CBD; it should be a component of a package of Council and Inner City Focus Group initiatives.

What it can achieve is limited unless it is accompanied by an upgrade of the retail offer in the “Boutique Precinct” in southern Tutanekai Street. The upgrade of City Focus and other streetscape improvements will help improve what is already a pleasant urban environment. But no amount of streetscape improvements will achieve revitalisation unless the retail offer itself improves.

The City Council, through Inner City Enterprises, and Inner City Focus Group are jointly helping to restore confidence among CBD retailers. Anecdotally, vacancies on Tutanekai Street within the Boutique Precinct are being taken up but a trend towards replacing comparison goods stores with fast food outlets may be emerging. We cannot say that the combination of City Focus reconfiguration and the other revitalisation initiatives will be sufficient to lead to an improvement of the retail offer. Retailers will need to provide a high-quality, unique mix of product offers to the resident and visitor




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markets for sustainable revitalisation to be assured. This implies significant commercial investment in CBD revitalisation is required; cosmetic reconfiguration of City Focus will not be enough.

Benefits of coBenefits of coBenefits of coBenefits of co----ordinated management of CBD retailingordinated management of CBD retailingordinated management of CBD retailingordinated management of CBD retailing

Reconfiguration of City Focus, in itself, will have only modest benefits for retailing in Rotorua’s CBD, but forms a useful component of the broader Rotorua City Council and Inner City revitalisation programme.

In our view, greater benefits for CBD retail in terms of attracting shoppers and increasing spend could be achieved from introduction of retail mall management and marketing practices in City Focus. These could include:

1. Establishment of a private-public management body.

2. Selection of retail tenants by product type to ensure there is a balanced and attractive mix of stores on offer. For example, the character of a “Boutique Precinct” implies high-end, speciality comparison retail shops should predominate but be interspersed with cafes and food bars. This is not the character of City Focus at present.

3. Emphasis should be given to marketing of the “Boutique Precinct” as a whole; this would require a levy on businesses to the management body, and a matching contribution from the Council.

4. Similarly, if there is a need for improvements to the streetscape, street furniture, etc, beyond what the Council is prepared to fund from rates, a levy could be paid by businesses to the management body for this purpose.

5. Continued development of an event/entertainment programme in City Focus, with particular emphasis on attracting shoppers.

6. Better monitoring of City Focus impact. Current occupancy surveys are too intermittent and blunt to gauge the impact of City Focus on retail performance in Tutanekai Street. There should be a regular monitor of retailers’ sales performance. In McDermott Miller’s experience retailers would be prepared to reveal sales data to evaluate the impacts of these changes if they were sure it would be treated in confidence and that it helps improve sales.

RecommendationsRecommendationsRecommendationsRecommendations

Option BOption BOption BOption B, Refiguring City Focus, Refiguring City Focus, Refiguring City Focus, Refiguring City Focus

1. The sails and pillars of City Focus be removed.

2. Traffic reconfiguration per Option BOption BOption BOption B, Refiguring City Focus,, Refiguring City Focus,, Refiguring City Focus,, Refiguring City Focus, be implemented, as an interim step, pending the review recommended (4.) below.

3. As part of the reconfiguration provision be made for a layby near Amohau Street where cars can stop briefly to drop off or pick up shoppers.

4. There should be a more detailed review of pedestrian and traffic options in the “Boutique Precinct” section of Tutanekai Street with the aim of integrating it with the Central Mall, now




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the possibility of making Amohau Street into a “Boulevard” is off the table. As part of this, conversion of Tutanekai Street/Hinemoa Street back to a normal intersection (with a “barn-dance” crossing), should be evaluated alongside retention of the reconfigured City Focus (Option B).Option B).Option B).Option B).

5. There should be a regular monitor of Tutanekai Street retailers’ sales performance. Current occupancy surveys are too intermittent and blunt to gauge the impact of City Focus on retail performance. In McDermott Miller’s experience retailers are prepared to reveal sales data to help evaluate the impacts of changes if they are sure it would be treated in confidence and that it helps improve sales.

6. Retail mall management and marketing practices be applied in City Focus and the “Boutique” section of Tutanekai Street through establishment of a private-public management body. Ways and means of introducing retail mall management and marketing practices in City Focus and the Boutique Precinct should be assessed by Rotorua District Council in association with building owners and retailers.

Figure Figure Figure Figure EEEEA1.1 City Focus “Shared Space” ConceptA1.1 City Focus “Shared Space” ConceptA1.1 City Focus “Shared Space” ConceptA1.1 City Focus “Shared Space” Concept

Source: Rotorua District Council, September 2014

[Ends]

McDermott Miller Limited 19 December 2014




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1111 INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION

1.11.11.11.1 COMMISSIONCOMMISSIONCOMMISSIONCOMMISSION

McDermott Miller was commissioned by Rotorua District Council in October 2014 to assess the economic impacts of City Focus on Rotorua’s Inner City as it currently stands and under two “re-development” scenarios. Our assessment focused on these two questions:

• "What has been the impact of City Focus on the economics of the inner city"; and,

• "What is the potential impact of reconfiguring, or removing City Focus".

We have assessed the current and future economic impacts through comparing three options for “reconfiguring” City Focus:

Option A. No Change

Option B. Removal of the sails and central pillars on Tutanekai Street, and reconfiguring City Focus as proposed in the City Focus “Shared Space” concept drawing (refer Figure Figure Figure Figure EA1.1 and EA1.1 and EA1.1 and EA1.1 and A1.1)A1.1)A1.1)A1.1)

Option C. Removal of City Focus altogether, i.e. conversion of the Tutanekai Street/Hinemoa Street intersection back to a normal central city intersection.

1.21.21.21.2 CBD RETAILING OVER TCBD RETAILING OVER TCBD RETAILING OVER TCBD RETAILING OVER TIMEIMEIMEIME

Trends affecting CBD RetailingTrends affecting CBD RetailingTrends affecting CBD RetailingTrends affecting CBD Retailing

In this report, we follow the Operative District Plan and apply the term “CBD” to the area termed “City Centre 1 zone” under the Proposed Plan. The term “Inner City” applies to the combined areas of the City Centre 1, 2 and 3 zones under the Proposed District Plan.

We first examine the hypothesis that City Focus negatively affects the attractiveness of stores close to City Focus, and therefore the performance and attractiveness of tenancies to retailers. This hypothesis needs to be examined in the context of four underlying trends:

1. Long-standing poor performance of retail in Rotorua’s CBD. This predates Central Mall, and indeed is the reason City Focus was developed in 1994 as part of the early 1990’s City Redevelopment programme;

2. Slow recovery (at best) in retail sales in the District as a whole since the negative impact of recession following the “Global Financial Crash” of 2008;




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3. A continuing shift in comparison goods sales from the CBD to Central Mall (refer Figure 1.1 below), and to a degree to newer convenience and trade/home retail centres in the Industrial Zone (along the State Highway arteries); and,

4. A trend for remaining retail in the CBD to become more concentrated along the Tutanekai Street axis and to atrophy off this axis.

Timeline of CBD retailingTimeline of CBD retailingTimeline of CBD retailingTimeline of CBD retailing

To help understand the implications of these trends we list significant events which have impacted on retailing in Rotorua’s CBD over the last 40 years (see Table 1.1 on the following page).




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Table 1.1 Timeline Table 1.1 Timeline Table 1.1 Timeline Table 1.1 Timeline of Retailing Changes in the Rotorua CBDof Retailing Changes in the Rotorua CBDof Retailing Changes in the Rotorua CBDof Retailing Changes in the Rotorua CBD

1970's Tutanekai Mall developed, in Tutanekai Street between intersections with Pukuatua Street and Hinemoa Street

1990

Rotorua District Council commissions and adopts a concept plan from Worley Gillman Ltd on initiatives to revitalise the CBD. Report proposes $4.4 million upgrade, including extension of Mall to Eruera Street including closing the intersection of Hinemoa and Tutanekai Streets

1991 Landscape and traffic engineering study for Rotorua CBD wins architecture award

1992 City Redevelopment programme to improve streetscapes of, and traffic movement in, CBD in progress

1993 Decision made to remove Tutanekai Mall under pressure from retailers in the Mall

1994 Initial proposals put forward for retail development on the Railway land at Amohau Street

1994 Retailers in Tutanekai Mall petition for its immediate removal, saying "we believe early removal of the Mall is vital to enhance a rapidly deteriorating area".

1994

City Focus developed to serve as a focal point for citizens and visitors alike. Combines a sculpture, a space for events, an information office and a community constable. Part of the broader City Redevelopment programme to upgrade streetscapes of CBD

1999 Beginning of LFR operation on former railway land, with opening of the Warehouse and Warehouse Stationery

2000 Stage 1 of Rotorua Central Mall opens, with supply of some 8000 m2 comparison retail

2004 Central Mall expands to over 20,000 m2 comparison retail with addition of Harvey Norman

2006 Farmers, formerly the "anchor" of CBD retail, relocates from Hinemoa Street (and smaller store in Tutanekai Street) to Central Mall, bring Central Mall comparison retail to some 30,000 m2

2010 Weekly Night Market in Tutanekai Street begins

2011 Hinemoa Arcade developed, adjoining City Focus - a specialty retail development accompanying apartment development. Take up has been slow, and it remains largely vacant.

2013 Council's Eat Streat development in northern Tutanekai Street opens

2013

Extensions and upgrade to Central Mall, including Smiths City new Amohau Street entrance and enclosing part of Mall; relocation of CBD retailers to Central Mall continues with Glassons moving from Tutanekai Street

2013 Inner City Focus Group (business association) and established; initiatives includes "Scrub Rotorua Day".

2013 Introduction of monitored free parking in CBD core employing "smart" monitoring (2 hr max)

2013 Council establishes Inner City Enterprises unit, at City Focus

2013 Revitalisation of Inner City becomes a Council Priority under Rotorua 2030 vision;

2014 Programme to upgrade intersection in CBD to improve traffic flows.

2014 Smiths City to relocate to Central Mall from Te Ngae Shopping Centre; Life Pharmacy relocates from Tutanekai Street; owner announces Central Mall essentially complete

Future Specialty and tourist oriented retail planned under The Lakefront East Concept Plan (Appendix A5.7 of Proposed District Plan) and Rotorua Lakefront Development Framework, 2012

LongLongLongLong----Term Sales Performance of CBD retailingTerm Sales Performance of CBD retailingTerm Sales Performance of CBD retailingTerm Sales Performance of CBD retailing

The timeline indicates that, in the 1960’s and 1970’s, there was substantial growth in Government employment and corporate employment in Rotorua’s CBD, and this supported the investment in commercial office and retail buildings in Rotorua during that period. The former Post Office building (now Royal Court Apartments and part of Hinemoa Arcade) in Hinemoa Street illustrates this; it had five floors used by the Post Office and some 500 employees were reported to work there. These workers, close to Tutanekai Street, provided vitality and spending power to the stores in the area and the wider CBD.




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During the economic reforms of the middle and late 1980’s Government and then SOE employment began to fall. For example “downsizing” of the Post Office meant the loss of an estimated 500 jobs and four floors of Post Office building became vacant before1998. Corporates also shifted jobs out of Rotorua. This has resulted in an erosion of spending power which measures such as City Focus cannot significantly offset. Figure 1.1Figure 1.1Figure 1.1Figure 1.1 below shows McDermott Miller’s estimates of CBD comparison goods retail sales over the long term. The chart includes our estimate of CBD sales in 19871 of $207 million (in 2013 $). This shows CBD retailing was in decline in the 1980’s well before the development of City Focus and Central Mall and also helps explain why there was seen to be a need for the City Redevelopment project that began in 1990 and which included the City Focus. We estimate that in 2013 comparison retail sales in the Inner City as a whole were around $209 million, of which 53% were in the CBD and 47% in Central Mall2. The chart illustrates how the CBD’s sales (in real terms) fell as Central Mall’s sales grew, and how events such as the relocation of Farmers to the Central Mall in 2006 contributed to this process.

1 Based on 1987 Economy Wide Census data 2 This share is estimated from MarketView electronic transactions data. In much of 2013 there were vacancies in Central Mall which have been, or will be filled, eg by Smiths City. This will increase Central Mall’s share of sales.




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Figure 1.1 Timeline of CBD and Central Mall Comparison Retail Sales (Constant 2013$)Figure 1.1 Timeline of CBD and Central Mall Comparison Retail Sales (Constant 2013$)Figure 1.1 Timeline of CBD and Central Mall Comparison Retail Sales (Constant 2013$)Figure 1.1 Timeline of CBD and Central Mall Comparison Retail Sales (Constant 2013$)

$0

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Year

Est. Sales ($M)

CBD

Centra l M all

Cncl & Inner City Focus Grp

initiatives to revitalise CBD

CBDcore Free Parking &

intersection upgrades

Tutanekai Mall removed

City Focus developed

Tutanekai Mall removed

City Focus developed

Warehouse opens –

beginning of Central Mall

Concept plan for CBD

inc extension of Tutanekai

Mall & closing of Hinemoa/

Tutanekai intersection

CBD Redevelopment

In progress

CBD Redevelopment

In progress

Central Mall Stg1 opens

Central Mall expands to

20k+ sq comparison retail

Farmers relocates to

Central Mall

HinemoaArcade developed

GFC impacts on

retail performance

Smiths City opens

Owners say Central Mall

complete & plan

Lakefront retail

Trade Central opens

Partial enclosure of Mall

& new entrance

Railway land

retail proppsed

With addition of Farmers

Mall reaches some 30k+ sq

comparison retail

1970’s Tutanekai Mall

developed in between

Pukuatua and Hinemoa

Street intersections

Major Events in CBD comparisonretail

Major events in comparison retail outside CBD

Source: McDermott Miller estimates based on MarketView electronic transactions data, TelferYoung Vacancy Survey, Statistics NZ Employment Data and 1987 Economy Wide Census.

McDermott Miller Limited, 21 November 2014




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2 EFFECTS OF CITY FOCUEFFECTS OF CITY FOCUEFFECTS OF CITY FOCUEFFECTS OF CITY FOCUSSSS

2.12.12.12.1 TTTTHE RATIONALE FOR DEVHE RATIONALE FOR DEVHE RATIONALE FOR DEVHE RATIONALE FOR DEVELOPMENT OF CITY FOCELOPMENT OF CITY FOCELOPMENT OF CITY FOCELOPMENT OF CITY FOCUSUSUSUS

Council-led initiatives to support and stimulate retailing in Rotorua’s CBD have a long history. An early example is the development of Tutanekai Mall, a pedestrian-only mall between in Tutanekai Street between intersections with Pukuatua Street and Hinemoa Street. We understand this was developed in the 1970’s and for some time added to the attractiveness of Tutanekai Street as Rotorua’s prime shopping strip. In 1990 Rotorua District Council commissioned and adopted a concept plan from Worley Gillman Ltd on initiatives to redevelop the CBD. This proposed a $4.4 million upgrade of the CBD centred on Tutanekai Street. It included and extension of Tutanekai Mall to Eruera Street, and this meant closing the intersection of Hinemoa and Tutanekai Street, ie where City Focus now is. That is, what is now City Focus was originally conceived of as part of a long pedestrian-only Mall. Over subsequent years, the “City Redevelopment” programme to improve streetscapes of, and traffic movement in, the CBD was in progress. At the time, Rotorua Central Mall did not exist, but development of retailing on the redundant Railway site in Amohau Street was proposed, and this proposition sparked controversy. In the early/mid 1990’s retailers who became disenchanted with the then Tutanekai Mall began agitating for its conversion back to a street open to traffic. This included removal of two large entrance archways and a controversial sculpture. The retailers argued that improving vehicle-borne access to their stores would stimulate sales. In a petition to Council, retailers in Tutanekai Mall sought for its immediate removal, saying "we believe early removal of the Mall is vital to enhance a rapidly deteriorating area". The Council agreed to this; plans for extending the Mall were cancelled and the Mall was removed in mid-1994. In spite of this, planning for a pedestrian structure/development on the Tutanekai Street/Hinemoa Street intersection continued as part of the broader City Redevelopment programme to upgrade streetscapes of the CBD. The purpose changed however, from being part of an extended mall to a role as a small town square3. City Focus was developed to serve as a focal point for citizens and visitors alike, by combining a sculpture, a space for events, an information office and a community constable. It was intended to attract people into the centre of the CBD, and so to benefit CBD retailers in addition to providing community/cultural benefits. The reported cost of developing City Focus was around $730,000.

3 Rotorua’s original Town Square on the block bounded by Fenton, Haupapa, Hinemaru and Arawa Streets. (refer Block 23 in Figure AI.3), but it was progressively taken over by Council civic administration buildings.




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In response to retailer’s complaints about the effect of City Focus on traffic, in early 1995 soon after opening, the then District Engineer responded the intention of City Focus and associated roading changes was to “reduce the traffic through the area and the pedestrians should pre-dominate”. Council actions in 1993-94 to foster CBD retailing appear, in retrospect, to be contradictory. On the one hand, City Focus was intended to support retail activity by making the area more attractive and pedestrian friendly; a consistent approach would have involved making it part of an extended Tutanekai Mall, as originally envisaged. Instead, at the same time as City Focus was being constructed (1994), Tutanekai Mall was removed, ie to favour vehicle-borne over pedestrian shoppers. This inconsistency has served to limit the benefits of City Focus to CBD retailing.

2.22.22.22.2 EVENTS IN EVENTS IN EVENTS IN EVENTS IN CCCCITY ITY ITY ITY FFFFOCUSOCUSOCUSOCUS

The Economic and Regulatory Services Group Operational and Financial Report has monthly counts of events in City Focus. There were 385 such events in June year 2012, considerably up from 308 from the previous year but, on the data made available to us the March Year 2013 total ,would have fallen short of the 2012 result. The type of events that occur on City Focus include:

1. Charity fund raising and promotional activities;

2. Health education promotions;

3. Church services/revivalist meetings;

4. Educational institutions recruitment & graduation parades;

5. Music performances by visiting and local schools etc;

6. Advocacy group/pressure group events, eg collecting signatures for petitions.

We have no information on the numbers attending such events so it is not possible to estimate the spending generated by these events in the businesses in the City Focus area and wider CBD. We recognise that such business is only a spin off effect, and not the primary purpose of such community events. We accept that such events do have a positive community benefit, and have a secondary (if minor) effect of generating trips and spend in businesses.

Under Option B, we presume the improvement of the City Focus streetscape, improved accessibility to vehicles, would more than offset the loss in shelter caused by removal of the sails and/or that temporary sun and rain shelters could be erected if required.

If City Focus is entirely removed (Option C), the question arises of where such events would locate. We presume some events could be accommodated at alternative venues (eg Jean Batten Square, the small Hualapai Street park, or The Village Green), but the spin-off spending benefits to retailers in the City Focus area would be lost.

We recommend that headcounts be taken of those attending events at City Focus together with a interception survey to determine whether those attending such




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events come to the CBD for the express purpose of attending the event or not, and if so to gauge the amount of their spending.

2.32.32.32.3 MANIFESTATIONS OF MANIFESTATIONS OF MANIFESTATIONS OF MANIFESTATIONS OF RETAIL DECLINE IN VIRETAIL DECLINE IN VIRETAIL DECLINE IN VIRETAIL DECLINE IN VICINITYCINITYCINITYCINITY OF CITY OF CITY OF CITY OF CITY FOCUSFOCUSFOCUSFOCUS

These are:

1. Lowered pedestrian countsLowered pedestrian countsLowered pedestrian countsLowered pedestrian counts: Pedestrian Counts in the area have been falling since 1987. Currently it is some 620 per hour (both sides of road combined) on northern edge of City Focus, but this is only 40% of level in 1990. City Focus has not had a perceptible effect (negative or positive) on pedestrian counts over time.

Figure 2.1 Four Year MovinFigure 2.1 Four Year MovinFigure 2.1 Four Year MovinFigure 2.1 Four Year Moving Average Pedestrian Counts g Average Pedestrian Counts g Average Pedestrian Counts g Average Pedestrian Counts –––– Tutanekai Street Tutanekai Street Tutanekai Street Tutanekai Street Refer Figure 2.2 and A1.4 for map of Pedestrian Count Locations

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1200

1300

1400

1500

1600

1700

1800

1900

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

Average 4 Years to

Count

12+6

11+5

10+4

9+3

8+2

7+1

City Focus

developed

Central Mall

opens

Farmers

Relocates

Pairs of Pedestrian Count Locations

Note: Solid lines denote pairs of locations closest to City Focus © McDermott Miller 12 November 2014




13

Figure 2.2:Figure 2.2:Figure 2.2:Figure 2.2: Proposed Precincts of the Rotorua Inner CityProposed Precincts of the Rotorua Inner CityProposed Precincts of the Rotorua Inner CityProposed Precincts of the Rotorua Inner City (also see Figure A1.2)

CC1 WestCC1 WestCC1 WestCC1 West

CC1 EastCC1 EastCC1 EastCC1 East

Source: Draft Inner City0 Revitalisation Strategy, Rotorua District Council 28 May 2014




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2. Lowered traffic movementsLowered traffic movementsLowered traffic movementsLowered traffic movements: Current inter-peak traffic entering City Focus is 580 vph, compared to some 1170 entering intersection of Tutanekai and Eruera Street and 1260 entering intersection of Tutanekai and Pukuatua Streets. This is largely passing traffic, those shopping in the area would only be a small part of this.

3. Lowered salesLowered salesLowered salesLowered sales: Sales have fallen for the CBD as a whole, but mainly due to the affect of Central Mall, in particular relocation of Farmers and other stores (Figure 1.1Figure 1.1Figure 1.1Figure 1.1 above). Estimated comparison retail sales in the CBD as whole in 2013 are $112 million (see Figure 1.1Figure 1.1Figure 1.1Figure 1.1), or 42% below (in real terms) where they were in 1998 prior to opening of Central Mall.

4. Lowered Occupied Comparison Retail Space: Lowered Occupied Comparison Retail Space: Lowered Occupied Comparison Retail Space: Lowered Occupied Comparison Retail Space: The fall in comparison retail sales in the CBD has been accompanied by a fall in occupied comparison retail floorspace. Figures 2.Figures 2.Figures 2.Figures 2.3333 and 2.2.2.2.4444 show this since 2001 in Tutanekai Street and Hinemoa Street respectively. In 2013 there was 5,200 m2 of comparison retail space in Tutanekai Street on the blocks adjoining City Focus; this is some 20% below 2001 supply. In Hinemoa St, 2013 supply in the blocks adjoining City Focus is 33% below 2001 level. Supply fell 28% in the rest of the CBD over this period; more than the fall in Tutanekai Street near City Focus and only a little less than the fall in Hinemoa St. There is no evidence that City Focus has aggravated (in its immediate area) the loss in occupied comparison retail space and sales caused by the challenges to CBD retail outlined in Section 1.1 Section 1.1 Section 1.1 Section 1.1 above – chiefly loss of spending power and loss of shoppers and retailers to Central Mall. In fact, signs suggest it may have In fact, signs suggest it may have In fact, signs suggest it may have In fact, signs suggest it may have helped slow the decline in Tutanekai near City Focus relative to rest of CBD.helped slow the decline in Tutanekai near City Focus relative to rest of CBD.helped slow the decline in Tutanekai near City Focus relative to rest of CBD.helped slow the decline in Tutanekai near City Focus relative to rest of CBD.

Figure 2.Figure 2.Figure 2.Figure 2.3333: Occupied Comparison Retail Space : Occupied Comparison Retail Space : Occupied Comparison Retail Space : Occupied Comparison Retail Space ---- Tutanekai Street by Block Tutanekai Street by Block Tutanekai Street by Block Tutanekai Street by Block Refer Figure A1.3 for map of CBD Blocks

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

Average 4 Years to

Count

12+6

11+5

10+4

9+3

8+2

7+1

City Focus

developed

Central Mall

opens

Farmers

Relocates

Pairs of Pedestrian Count Locations

Source: McDermott Miller estimates based on TelferYoung Central Business District Vacancy Survey © McDermott Miller 21 November 2014




15

Figure 2.4Figure 2.4Figure 2.4Figure 2.4: Total Occupied Comparison Retail Space : Total Occupied Comparison Retail Space : Total Occupied Comparison Retail Space : Total Occupied Comparison Retail Space ---- Hinemoa Street by Block Hinemoa Street by Block Hinemoa Street by Block Hinemoa Street by Block Refer Figure A1.3 for map of CBD Blocks

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year

Sq m

Tutanekai 7 & 14

Tutanekai 8 & 15

Tutanekai 10 & 17

Tutanekai 11 & 18 (by CityFocus)

Tutanekai 12 & 19 (by CityFocus)

Tutanekai 13 & 20

Central Mall

opens

Farmers

Relocates

Pairs of CBD Blocks

Source: McDermott Miller estimates based on TelferYoung Central Business District Vacancy Survey © McDermott Miller 21 November 2014

5. Lowered rentsLowered rentsLowered rentsLowered rents: In CBD in general, rents appear to “out of kilter” with retail sales, ie not affordable leading to high vacancy rates and tenant turnover. There is no evidence the City Focus has aggravated this situation.

6. Lowered value of buildingsLowered value of buildingsLowered value of buildingsLowered value of buildings: FigureFigureFigureFigures 2.s 2.s 2.s 2.5555 and 2.2.2.2.6666 show the average value of improvements (buildings) per m2 of building area and average value of land per m2 of land area at March 2014. Figure 2.Figure 2.Figure 2.Figure 2.5555 shows these averages by block north to south along Tutanekai Street and Figure 2.Figure 2.Figure 2.Figure 2.6666 shows these by block east to west along Hinemoa Street. The available property value data does not support the contention that City Focus is negatively impacting on condition and values of nearby properties. Neither does the data confirm City Focus has a positive effect. However, it remains possible that City Focus has helped Tutanekai Street in blocks 11 & 18 and 12 & 19 retain its historic status as the prime retail area within the CBD.




16

Figure 2.Figure 2.Figure 2.Figure 2.5555: Average Value o: Average Value o: Average Value o: Average Value of Tutanekai Street Properties by Block North to Southf Tutanekai Street Properties by Block North to Southf Tutanekai Street Properties by Block North to Southf Tutanekai Street Properties by Block North to South as at March 2014as at March 2014as at March 2014as at March 2014 Refer Figure A1.3 for map of CBD Blocks

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

7 & 14 8 & 15 9 & 16 10 & 17 11 & 18 12 & 19 13 & 20

CBD Block

$/sq m

Improvements Value $/sq mbuilding area

Land Value $/sq m land area

Blocks near City Focus

Source: McDermott Miller estimates based on RDC rating data © McDermott Miller 12 November 2014

Figure 2.Figure 2.Figure 2.Figure 2.6666: Average Value of Hinemoa Street Properties by Block East to : Average Value of Hinemoa Street Properties by Block East to : Average Value of Hinemoa Street Properties by Block East to : Average Value of Hinemoa Street Properties by Block East to WestWestWestWest as at March 2014 as at March 2014 as at March 2014 as at March 2014 Refer Figure A1.3 for map of CBD Blocks

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

3 & 4 11 & 12 18 & 19 25 & 26

CBD Block

$/sq m

Improvements Value $/sq mbuilding area

Land Value $/sq m land area

Source: McDermott Miller estimates based on RDC rating data © McDermott Miller 12 November 2014




17

7. Lower quality of buildings/tenancies as a result low investmentLower quality of buildings/tenancies as a result low investmentLower quality of buildings/tenancies as a result low investmentLower quality of buildings/tenancies as a result low investment: The only place major new investment has occurred in the “Boutique Precinct” in recent years is Hinemoa Arcade and Royal Court Apartment immediately adjacent to City Focus. This contradicts the view that City Focus has deterred investment.

(a) Quality of tenancies in Tutanekai Street adjacent to City Focus (assessed by TelferYoung), is if anything, better than in the rest of Tutanekai Street, however there is significant “B” grade retail space on the western side of Tutanekai Street near to Pukuatua Street. Some 62% of storefront tenancies in Tutanekai Street on blocks adjoining City Focus rated as “A” grade by TelferYoung.

(b) Some 83% of buildings in Tutanekai Street on blocks adjoining City Focus are rated as “Good” for age by Quotable Value (source: RDC Rating Database). There is therefore no evidence from the available tenancy and building quality data that supports the view that City Focus has resulted in lower quality properties as a result of low investment.

8. Increased vacancy ratesIncreased vacancy ratesIncreased vacancy ratesIncreased vacancy rates: Vacancy rates in Tutanekai Street near to the City Focus are low compared to rest of Tutanekai Street. December 2013 storefront vacancy rate in Tutanekai Street near City Focus was 10%, and Hinemoa Street 33% compared to 20% in rest of CBD. The high vacancy rate in Hinemoa Street is due to the over-investment in the Hinemoa Arcade in 2011. It is unlikely reconfiguration of City Focus will contribute to increased occupancy of Hinemoa Arcade.

9. Increased turnover of tenantsIncreased turnover of tenantsIncreased turnover of tenantsIncreased turnover of tenants: On average there have been 3 tenants over 1998-2014 per storefront space in Tutanekai Street on blocks adjoining City Focus – ie average tenant lasts 5 years. This is not inordinately high. Compared to the rest of the CBD, there appears to be high turnover of tenants on Tutanekai Street but vacancies are relatively short-lived, ie new tenants can usually be found as storefronts are vacated. There is no evidence that tenancies adjacent to City Focus have higher turnover than those further away.

10. Negative perceptions of the area among shoppersNegative perceptions of the area among shoppersNegative perceptions of the area among shoppersNegative perceptions of the area among shoppers: There is no shopper survey data available to verify or refute this, and our limited stakeholder consultation was inconclusive.

11. Negative perceptions of the area among retailers and other CBD business Negative perceptions of the area among retailers and other CBD business Negative perceptions of the area among retailers and other CBD business Negative perceptions of the area among retailers and other CBD business peoplepeoplepeoplepeople: This is a long-standing issue. In the early 1990’s retailers pressured for the Tutanekai Mall to be removed in order to improve their sales; the removal took place in 1994 but if anything pedestrian counts went down. Up until recent months, City Focus was seen as being populated by “trouble makers” that were deterring shoppers. A combination of introducing “Crime Prevention through Environmental Design” (CPTED) practice, free time-limited parking in the core CBD and initiatives such as “Scrub Rotorua Day” are believed to be increasing shopper activity in the area.

12. Wider effects of City FWider effects of City FWider effects of City FWider effects of City Focusocusocusocus: Some business people claim City Focus acts as a deterrent to visits to the CBD as a whole and has contributed to its low sales performance versus Central Mall. We are unconvinced that is the case.




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2.42.42.42.4 HOW SUCCESSFUL HAS HOW SUCCESSFUL HAS HOW SUCCESSFUL HAS HOW SUCCESSFUL HAS CCCCITY ITY ITY ITY FFFFOCUS BEEN?OCUS BEEN?OCUS BEEN?OCUS BEEN?

City Focus has achieved its objectives as objectives as objectives as objectives as a a a a small city squaresmall city squaresmall city squaresmall city square; it is the venue for many small events (on average, around one a day), mostly put on by community organisations. City Focus’s event programme is discussed in Section 2.2Section 2.2Section 2.2Section 2.2 above. Our analysis has not provided conclusive evidence whether City Focus has effectively supported retailingsupported retailingsupported retailingsupported retailing in the Tutanekai/Hinemoa Street area or more widely in the CBD; neither has it conclusively shown that it has been to retail’s detriment. Retailing in the CBD has been severely affected by the trends outlined in Section Section Section Section 1.21.21.21.2. In particular, development of the City Focus coincided with removal of Tutanekai Mall and was followed 5 years later by development of the Central Mall, which resulted in shedding of shoppers and then shops themselves from the CBD. Comparison retailing in the CBD as a whole continued to decline in the years between development of City Focus and the opening of Central Mall. The partial success of City Focus in supporting retailers, is indicated by the temporary increase in pedestrian counts following the development of City Focus and removal of Tutanekai Mall (Figure 2.Figure 2.Figure 2.Figure 2.3333). However it is not possible to determine the relative contribution made by each of these major changes to the CBD.

Local retailers have contended that City Focus is having negative effects on retailing and investment in its immediate area, but we have found no proof of this in this desktop study. For example, vacancy rates and turnover of tenants and tenancy quality and building values and condition in Tutanekai Street adjacent to City Focus are no worse in the immediate vicinity of City Focus than those further away. Retailing in Hinemoa Street has been in serious decline, as evidenced by pedestrian counts and vacancy rates. But this is the case for all CBD retailing away from Tutanekai Street and there is no evidence Hinemoa Street has been adversely affected by City Focus in particular. The relocation of Farmer’s to Central Mall in 2006 and over investment in and failure of the Hinemoa Arcade in 2011 have been far more significant in their negative impact on vacancy rates.

While no data has been provided on casual use of City Focus, we understand it has functioned as a casual gathering place. We understand that, for a time, it was also a popular place for “trouble makers” to gather and the real or perceived threat of harassment was a deterrent to potential shoppers and other pedestrians. However, through application of CPTED principles, tables and seating were removed in September 2014, and the “trouble makers” no longer assemble. Unfortunately, without these amenities, City Focus must no longer be as attractive for others to linger in as well.




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3.3.3.3. FUTURE PROSPECTSFUTURE PROSPECTSFUTURE PROSPECTSFUTURE PROSPECTS

In this assessment we assume that other revitalisation initiatives set out in the Draft Inner City Revitalisation Strategy, Rotorua District Council 28 May 2014 are implemented. These include:

1. Pedestrians given priority on Tutanekai Street intersections, in particular to institute “barn dance” crossings on the intersections with Amohau Street and Eruera Street intersections to encourage pedestrians to move from Rotorua Central Mall into the heart of the CBD.

2. Upgrades to intersections to improve traffic flow at other intersections;

3. Time-limited free parking in the core CBD;

4. Inner City Focus Group’s “Scrub Rotorua Day”;

5. Council efforts, working with the Inner City Focus Group, to engage CBD business people in the process;

6. Differentiating the inner city offer into five precincts (Lakefront, Entertainment, Haupapa Street, Boutique Precinct, Rotorua Central Mall);

7. Streetscape/urban environment upgrades;

8. Relocation of Council services related to the CBD to 1251 Tutanekai Street, in City Focus;

9. Measures to discourage “trouble makers” from congregating in City Focus or elsewhere in CBD;

A key assumption is that there is no development of a competing speciality shopping area outside the CBD proper (ie City Centre 1 Zone under the proposed District Plan). Such a speciality retailing development would further undermine efforts to revitalise the CBD through the above measures and the reconfiguration (or removal) of City Focus. We also assume that:

10. speciality retailing on the Lakefront is limited to tourist-oriented retail (ie cafes/restaurants and souvenir/gift shops);

11. the Proposed District Plan is not changed to permit more speciality retailing in Rotorua Central Mall, given that the cancelled Victoria Street Arterial is a pre-requisite for this in the Proposed and Operative District Plans.

The comparative assessment is presented in the following table.




20

Option A: Option A: Option A: Option A: No ChangeNo ChangeNo ChangeNo Change

Option B: Option B: Option B: Option B: Remove Sails and Remove Sails and Remove Sails and Remove Sails and

Pillars and reconfigure Pillars and reconfigure Pillars and reconfigure Pillars and reconfigure traffic flows around traffic flows around traffic flows around traffic flows around

City FocusCity FocusCity FocusCity Focus

Option C: Option C: Option C: Option C: Complete Removal of Complete Removal of Complete Removal of Complete Removal of City Focus: conversion City Focus: conversion City Focus: conversion City Focus: conversion to standard intersection to standard intersection to standard intersection to standard intersection

Likely Changes in:Likely Changes in:Likely Changes in:Likely Changes in: SightlinesSightlinesSightlinesSightlines As at present: City Focus sails

and pillars obstruct sightlines, which is thought to inhibit pedestrian movement

Improved sightlines along Tutanekai Street and Hinemoa Street

Improved sightlines along Tutanekai Street and Hinemoa Street

Attractiveness to Attractiveness to Attractiveness to Attractiveness to ShoppersShoppersShoppersShoppers

Thought not to be attracting shoppers to the “Boutique Precinct”

Improved sightlines and redesigned layout of City Focus likely to make the “Boutique Precinct” more attractive to shoppers

No feature at Tutanekai Street/Hinemoa Street intersection to attract shoppers

Event VenueEvent VenueEvent VenueEvent Venue Used as venue for community events

Still be available as a venue but will be loss of sun/rain shelter

Events currently using City Focus would have to find alternative venue in CBD, or would be lost to CBD

Pedestrian activity. Pedestrian activity. Pedestrian activity. Pedestrian activity.

To stabilise but not recover significantly, depends on effectiveness of other revitalisation initiatives

Modest boost to pedestrian activity is likely through improved sight-lines and accessibility to car-borne shoppers, while retaining City Focus’s role as a space for community events. At-level traffic flows around City Focus could be a deterrent to some users (esp with children).

Depends on balance of two factors; City Focus would no longer be a feature, event venue or a space for casual use but improved sightlines and “barn dance” crossing would encourage pedestrian movement.

CarCarCarCar----borne shoppersborne shoppersborne shoppersborne shoppers .

Improvements at other intersections may have some effect

Some increase in car-borne shoppers is likely, but City Focus would remain a deterrent to vehicle flows.

Large – 114% increase in passing traffic to 1239 vph entering the intersection. Improved accessibility means this option would give largest boost to car-borne shoppers.

Effects on Retail Performance in the “Boutique Precinct”Effects on Retail Performance in the “Boutique Precinct”Effects on Retail Performance in the “Boutique Precinct”Effects on Retail Performance in the “Boutique Precinct” SalesSalesSalesSales

Continue to slide as a share of Rotorua sales

In conjunction with other revitalisation initiatives, slide in sales share is arrested and begins to recover.

Has potential to give a bigger boost to sales than Option B through increased visibility to passing traffic and accessibility to car-borne shoppers, but against this will be losses from diversion of events away from City Focus.

Occupied Occupied Occupied Occupied Comparison Retail Comparison Retail Comparison Retail Comparison Retail SpaceSpaceSpaceSpace

Likely to continue to slide in absolute terms and as a % occupied storefront space (this was 88% in Tutanekai Street in 2001 but is now 80%) . This risks Tutanekai Street’s role as the “Boutique Precinct”.

Step towards arresting the decline in comparison retail but other measures will be needed to maintain comparison retail in “Boutique Precinct”

As for Option B

[continues over page]




21

Effects on Retail Performance in the “Boutique Precinct” Effects on Retail Performance in the “Boutique Precinct” Effects on Retail Performance in the “Boutique Precinct” Effects on Retail Performance in the “Boutique Precinct” [continued]

Option A: Option A: Option A: Option A: No ChangeNo ChangeNo ChangeNo Change

Option B: Option B: Option B: Option B: Remove Sails and Remove Sails and Remove Sails and Remove Sails and

Pillars and reconfigure Pillars and reconfigure Pillars and reconfigure Pillars and reconfigure traffic flows around traffic flows around traffic flows around traffic flows around

City FocusCity FocusCity FocusCity Focus

Option C: Option C: Option C: Option C: Complete Removal of Complete Removal of Complete Removal of Complete Removal of City Focus: conversion City Focus: conversion City Focus: conversion City Focus: conversion to standard intersection to standard intersection to standard intersection to standard intersection

VacanciesVacanciesVacanciesVacancies

Vacancies on Tutanekai Street will continue to be taken up, but will persist and worsen (vacated premises unlikely to be re-tenanted by permanent tenants) in Hinemoa Street and rest of CBD other than Entertainment Precinct..

Vacancies will still occur in Tutanekai Street but average time of re-tenanting may reduce. Improved flows along Hinemoa Street may mean some vacancies in Hinemoa Arcade are taken up.

As for Option B. Large increase in traffic on Hinemoa Street could make vacant Hinemoa Arcade tenancies attractive, but currently there are extensive vacancies on other east-west streets in CBD.

Tenant TurnoverTenant TurnoverTenant TurnoverTenant Turnover .

Will continue at present rates, in Tutanekai Street.

May help achieve more stability

As for Option B.

Store QualityStore QualityStore QualityStore Quality .

Quality of retail stores and buildings they are in unlikely to improve

Will give modest boost to chances of attracting and/or retaining mid- to up-market retailers

May improve chance of attracting and retaining mid- to up-market retailers compared to Option B as clientele will come by vehicle.

Building QualityBuilding QualityBuilding QualityBuilding Quality 83% of buildings in Tutanekai Street on blocks adjoining City Focus rated as “Good” for age by Quotable Value

Significant investment by owners to improve tenancy and building quality unlikely.

Improves chance of modest investment, but significant upgrading in near-medium term is unlikely due to failure of Hinemoa Arcade to attract permanent tenants.

As for Option B

Overall Effects on economic activityOverall Effects on economic activityOverall Effects on economic activityOverall Effects on economic activity In the immediate area As at present Modest positive benefit Possible stronger events,

but riskier approach than Option B.

For the CBD as a whole

As at present Modest positive benefit As much of new traffic in Hinemoa Street would be diverted from other streets, would be small effect at CBD level. Other parts of CBD will benefit to some extent to relocation of some events.

For the District as a whole

As at present No significant effect If it can help attract and retain mid-to-upmarket retailers could have most effect of increasing retention of Rotorua resident spend and increasing visitor spend.

Integrated mall managementIntegrated mall managementIntegrated mall managementIntegrated mall management

As at present Integrated mall management possible with potential significant effect

Integrated mall management no longer possible.



22

4.4.4.4. CONCLUSION AND RECOMCONCLUSION AND RECOMCONCLUSION AND RECOMCONCLUSION AND RECOMMENDATIONSMENDATIONSMENDATIONSMENDATIONS

4.14.14.14.1 CONCLUSIONCONCLUSIONCONCLUSIONCONCLUSION

In our view, removal of the sails and pillars of City Focus and reconfiguring its traffic flows has potential to make a modest positive contribution to revitalisation of Rotorua’s CBD, as a component of a package of Council and Inner City Focus Group initiatives. It will help implement the City Revitalisation Strategy of “Strengthening the Spine” of the CBD from Eat Streat in the North to Amohau Street. It is important, however, to recognise such impacts are minor compared to the challenges to retailing across Rotorua’s CBD from a continuing loss in real spending power by shoppers and retailers attracted to Central Mall. Potential impact of reconfiguring City FocusPotential impact of reconfiguring City FocusPotential impact of reconfiguring City FocusPotential impact of reconfiguring City Focus

1. Traffic Movements along Tutanekai and Hinemoa StTraffic Movements along Tutanekai and Hinemoa StTraffic Movements along Tutanekai and Hinemoa StTraffic Movements along Tutanekai and Hinemoa Streetreetreetreet: : : : Under Option BOption BOption BOption B would increase, but less than with full removal (see below).

2. Increased pedestrian movement: Increased pedestrian movement: Increased pedestrian movement: Increased pedestrian movement: Combined with the new time-limited free parking policy, the increase in traffic could be expected to result in an increase in pedestrian activity. The improvement in sightlines could also have a positive effect on pedestrian activity along the length of Tutanekai Street. Introduction of “barn dance” crossings in the intersections of Tutanekai Street with Amohau Street and Eruera Street would contribute to free pedestrian movement to and from Central Mall.

3. Pedestrian movement in City Focus would increase if provision is made for a layby near Amohau Street where cars can stop briefly to drop off or pick up shoppers.

4. Increased sales: Increased sales: Increased sales: Increased sales: Modest increased traffic and pedestrian activity, combined with the other environmental upgrades already in place and planned, can be expected to increase retail sales in the putative “Boutique Precinct” of the CBD. RDC’s relocation of services related to the CBD to 1251 Tutanekai Street will contribute to this.

5. Effect on private sector investment: Effect on private sector investment: Effect on private sector investment: Effect on private sector investment: Crucial to a sustainable improvement in the CBD is an improvement in quality of the retail offering, including an upgrade of the buildings. This will not necessarily follow on from reconfiguration of City Focus. Anecdotally, completion of “Eat Streat” has not yet led to investment/upgrading of the businesses salongside it and this may also be the case with reconfiguration of City Focus. Reconfiguration of City Focus is a “necessary”, but not “sufficient” condition for this to happen.



23

Impact ofImpact ofImpact ofImpact of Complete Complete Complete Complete Removal of City Focus Removal of City Focus Removal of City Focus Removal of City Focus

1. Increased Traffic Movements along Tutanekai and Hinemoa StIncreased Traffic Movements along Tutanekai and Hinemoa StIncreased Traffic Movements along Tutanekai and Hinemoa StIncreased Traffic Movements along Tutanekai and Hinemoa Streetsreetsreetsreets: : : : Traffic modelling work undertaken for us by RDC engineers indicates that traffic flows along Hinemoa Street would greatly increase; there would only be a small increase in absolute terms in traffic along Tutanekai Street.

2. Whether Whether Whether Whether complete removal of City Focuscomplete removal of City Focuscomplete removal of City Focuscomplete removal of City Focus provides a bigger boost for retailing provides a bigger boost for retailing provides a bigger boost for retailing provides a bigger boost for retailing in the CBD than in the CBD than in the CBD than in the CBD than reconfiguring itreconfiguring itreconfiguring itreconfiguring it depends on the depends on the depends on the depends on the balance of two factors; optimising the accessibility of the CBD for car-borne household shoppers, which is supported best by complete removal versus providing a quality urban environment which will attract foot-borne tourists as well as residents and act as venue for small events.

In the absence of shopper survey information it is a matter of judgement what the optimum balance should be. The observed existing pattern is for tourist activity to concentrate in the northern CBD – the Entertainment Precinct - and in Fenton Street in and near the Haupapa Street Precinct. Resident shoppers, in contrast, concentrate in the southern “Boutique Precinct” near to Rotorua Central Mall. The Council should build on this differentiation, rather than seek to counter it. Complete removal of City Focus variation 1 variation 1 variation 1 variation 1 therefore should be considered seriously.

Integration of CentrIntegration of CentrIntegration of CentrIntegration of Central Mall with CBDal Mall with CBDal Mall with CBDal Mall with CBD

A key recommendation of McDermott Miller’s report to Rotorua District Council on Inner City Revitalisation and Investment: Economic Assessment (24 April 2014) is:

The attractiveness and walkability of the CBD could be improved by:

5.1 Segmenting the City Centre into precincts and promoting respectively their predominant activities: daytime shopping market; night-time leisure market; and, civic or commercial functions, as indicated in Figure 1.3.

5.2 Creating a pedestrian focussed space in southern Tutanekai Street to function as a “Fashion Quarter” and find means of helping integrate Central Mall with the CBD, as outlined in Section 5.3.

The question is which of the City Focus options best serves this objective: Option AOption AOption AOption A (No Change), Option B Option B Option B Option B (Reconfiguration), or Option COption COption COption C Removal, now that the diversion of the State Highway along the Victoria Street Arterial has been cancelled. An improved linkage between the “Boutique Precinct” and Central Mall would, at least require a “barn dance” crossing from Tutanekai to Amohau Street. If vehicles have priority through the “Boutique Quarter “ of Tutanekai Street, Option Option Option Option B B B B would be our recommended option. It would be subject to review after a period of operation. The review would assess whether the removal of sail and pillars combined with reconfiguration of traffic flows around City Focus has achieved tangible benefits; if not, Option COption COption COption C complete removal should be revisited.



24

On the other hand, if Tutanekai Street gives pedestrians priority through the “Boutique Quarter”, Option COption COption COption C (complete removal of City Focus) should be implemented. The traffic modelling data indicates that Tutanekai Street carries little traffic compared with the east-west oriented streets. It may be possible to make Tutanekai Street a succession of pedestrian-priority shared spaces, between intersections. The intersections, including with Hinemoa Street would all be free of structures that impede east-west vehicle flow, but would be easy for pedestrians to cross during “barn dance” light phases.

The event venue role of City Focus could be achieved by temporarily creating pedestrian only spaces in Tutanekai Street by means of movable barriers such as planter boxes. Limitations Limitations Limitations Limitations ofofofof Reconfiguring City Focus Reconfiguring City Focus Reconfiguring City Focus Reconfiguring City Focus

Removal of the sails and pillars of City Focus and reconfiguring its traffic flows would be a modest but positive step towards revitalisation of Rotorua’s CBD; it should be a component of a package of Council and Inner City Focus Group stakeholder initiatives.

What it can achieve is limited unless it is accompanied by an upgrade of the retail offer in the “Boutique Precinct” in southern Tutanekai Street. The upgrade of City Focus and other streetscape improvements will help improve what is already a pleasant urban environment. But no amount of streetscape improvements will achieve revitalisation unless the retail offer itself improves.

The City Council, through Inner City Enterprises, and Inner City Focus Group are jointly helping to restore confidence among CBD retailers. Anecdotally, vacancies on Tutanekai Street within the Boutique Precinct are being taken up, but a trend towards replacing comparison goods stores with fast food outlets may be emerging. We cannot say that the combination of City Focus reconfiguration and the other revitalisation initiatives (see Section 3Section 3Section 3Section 3) will be sufficient to lead to an improvement of the retail offer. Tutanekai Street retailers will need to provide a higher quality, unique mix of product offers to the resident and visitor markets for sustainable revitalisation to be assured. This implies significant commercial investment in CBD revitalisation is required; cosmetic reconfiguration of City Focus will not be enough.



25

4.24.24.24.2 BENEFITS OF COBENEFITS OF COBENEFITS OF COBENEFITS OF CO----ORDINATED MANAGEMENTORDINATED MANAGEMENTORDINATED MANAGEMENTORDINATED MANAGEMENT OF CBD OF CBD OF CBD OF CBD RETAILINGRETAILINGRETAILINGRETAILING

Reconfiguration of City Focus, in itself, will have only modest benefits for retailing in Rotorua’s CBD, but will be a useful component of the broader Rotorua City Council and Inner City Focus Group revitalisation programme. In our view, greater benefits for CBD retail in terms of attracting shoppers and their spend could be achieved from introduction of retail mall management and marketing practices in City Focus and the adjoining retail strips This would include:

1. Establishment of a private-public management body.

2. Selection of retail tenants by product type to ensure there is a balanced and attractive mix of stores on offer. For example, providing the character of a “Boutique Precinct” implies that speciality comparison retail shops should predominate but be interspersed with cafes and food bars.

3. Emphasis given to marketing the “Boutique Precinct” as a whole; this would require a levy on businesses to the management body, with a matching contribution from the Council.

4. Similarly, if there is a need for improvements to the streetscape, street furniture, etc, beyond what the Council is prepared to fund from rates, a levy could be paid by businesses to the management body for this purpose.

5. Continued development and provision of event/entertainment programme in City Focus, with particular emphasis on attracting shoppers.

6. Better monitoring of City Focus related retail performance.

4.34.34.34.3 RECOMMENDATIONSRECOMMENDATIONSRECOMMENDATIONSRECOMMENDATIONS

7. The sails and pillars of City Focus be removed.

8. Traffic reconfiguration per Option BOption BOption BOption B, Reconfiguring City Focus,, Reconfiguring City Focus,, Reconfiguring City Focus,, Reconfiguring City Focus, be implemented, as an interim step, pending the review recommended (4.) below.

9. As part of the reconfiguration provision be made for a layby near Amohau Street where cars can stop briefly to drop off or pick up shoppers.

10. There should be a more detailed review of pedestrian and traffic options in the “Boutique Precinct” section of Tutanekai Street with the aim of integrating it with the Central Mall, now the possibility of making Amohau Street into a “Boulevard” is off the table. As part of this, conversion of Tutanekai Street/Hinemoa Street back to a normal intersection (with a “barn-dance” crossing), should be evaluated alongside retention of the reconfigured City Focus (Option B).Option B).Option B).Option B).



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11. There should be a regular monitor of Tutanekai Street retailers’ sales performance. Current occupancy surveys are too intermittent and blunt to gauge the impact of City Focus on retail performance. In McDermott Miller’s experience retailers are prepared to reveal sales data to help evaluate the impacts of changes if they are sure it would be treated in confidence and that it helps improve sales.

12. Retail mall management and marketing practices be applied in City Focus and the “Boutique” section of Tutanekai Street through establishment of a private-public management body. Ways and means of introducing retail mall management and marketing practices in City Focus and the Boutique Precinct should be assessed by Rotorua District Council in association with building owners and retailers.

[EN[EN[EN[ENDS]DS]DS]DS] McDermott Miller McDermott Miller McDermott Miller McDermott Miller StrategiesStrategiesStrategiesStrategies 19 December 2014)

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