By Frank Newman on 17th August 2014
Central Business Districts (CBDs) are facing the challenges of change. People are changing the way they go about their lives and in particular how they spend their money. Many CBD’s are struggling to remain relevant against competition from big box retailers and as offices move to the cloud. As a result the CBD is evolving as a place for small footprint boutique retailers, cafes, bars, restaurants and inner city apartment living. That evolution is taking some time (decades) to work through but some provincial towns are taking the initiative by taking action now.
One I visited recently had just removed parking meters from its CBD. They have made parking free, with a three hour time limit. It’s a simple thing for a council to do, but of course they need to be prepared to sacrifice the revenue stream the meters provide (although in truth they will simply load the lost revenue onto ratepayers). In fact, there is a lot local councils can learn from shopping centres about how to attract shoppers- free parking is a major one.
Free parking was also one of 100 ideas to come from a community brainstorming meeting facilitated by the Tauranga City Council earlier this year. The Rotorua District Council too has promised a comprehensive plan to bring life back to their listless CBD.
There are other things councils are doing besides making it convenient for shoppers to park. Some are relaxing planning regulations so conversion of properties to residential use can happen as of right, rather than through an uncertain and frustrating resource consent process that is about as welcoming as a tooth extraction, and a great deal more expensive . This is exactly what Melbourne City Council did to revitalised its CBD. It encouraged the conversion of old industrial buildings into new residential spaces by changing regulations, and improved the street level environment. As a result the number of residential units in Melbourne’s CBD population grew by more than 30,000 in just 15 years.
This sort of initiative requires leadership. Our local body politicians would need to give stronger guidance to staff about the approach they are to take. Unfortunately the vocal “we want things to stay the same” minority have been very good at pressuring council staff and councillors into putting roadblocks in the way of progress. That needs to change but will only change if there is a will from our elected representatives – and that can only come from the top. There also needs to be a change of attitude: Instead of regulation we need innovation; a can instead of can’t attitude; encouragement instead of discouragement; and more entrepreneurs instead of more bureaucrats.
CBD landlords too are being forced to adapt. They are reducing rents and becoming more creative about how they structure their lease arrangements. Some are abandoning the standard commercial lease that locks a tenant in for years by offering their space on a week by week basis to meet a growing demand from “pop up stores”.
Pop up retailing is becoming big business. There are a number of advantages for tenants.
- It suits business unsure about the long-term viability of their business in a location. Some businesses need support for selling a business.
- It suits those who want to off-load stock at a location that is not going to compromise their existing outlet, or those who want to target a particular selling period e.g. Christmas.
- It gives those with new products the opportunity to test the market response. Even existing bricks and mortar retailers are using temporary locations to test a new product lines and create some excitement.
It’s also advantageous to a landlord who would otherwise have vacant space that is draining cash from their bank account. Some real estate brokers are now catering especially for these short-term tenancies. Most pop up shop tenancies range from 1 week to two months.
Having real estate agents encourage pop up tenancies is good for landlords and another way of returning vibrancy to areas like the CBD.