Rolling out the red carpet

The regions are enticing businesses away from our largest city like never before. Is relocating the answer to the rising costs and stresses experienced by Auckland business owners? And what’s the key to a successful relocation? NZBusiness went to three regions for some answers.

For beleaguered businesses across Auckland, handicapped by rising costs, ‘catch-up’ infrastructure and unhappy workers shut out of the housing market, the regions have in recent times looked increasingly attractive.

Once considered backwaters and mere service centres for surrounding rural districts, over the past decade regional centres have morphed into lively, lifestyle-friendly and progressive places that are welcoming businesses with open arms. Local economic development agencies in the larger centres are laying on the incentives and facilities to convince Auckland businesses of the merits of relocating.

NZBusiness chose Northland, Tauranga/Bay of Plenty and the Waikato as regional examples for this story – although many other regions are also experiencing success in attracting businesses.

In Northland, Marsden Maritime Holdings (MMH), formerly Northland Port Corporation, is a publicly-listed company based at Marsden Point whose shareholders include the Northland Regional Council (53.61 percent) and Ports of Auckland (19.9 percent).

MMH’s key business focus is attracting business to its landholdings near the port and marina.

In 2017 economic forecasting firm Infometrics identified Marsden Point/Ruakaka as a regional hotspot for growth, thanks to its transport links to Auckland and availability of vacant industrial land.

MMH CEO Felix Richter, says the port hinterland is ideal for a number of uses, ranging from dry bulk or bulk liquid storage to de-vanning and distribution, manufacturing, processing, as well as commercial and other business activities.

“Further away from the port, we have areas designated for lighter industries, including smaller scale manufacturing, parallel import warehousing, commercial offices, etc.,” says Richter. “We are particularly noticing increasing interest from businesses servicing the growing residential population at Marsden Cove, One Tree Point, and Ruakaka. As some of these are very new developments, businesses involved in home improvement are popping up.

“We are also keen to attract more marine-related businesses and services to the marina and, in particular, to continue developing our marine services precinct near the boatyard.”

Richter says they are in confidential discussions with “quite a few” Auckland-based businesses that are contemplating the move north. One new tenant that doesn’t mind being publicly mentioned is Extrutec – a polymer extrusion company that relocated from Auckland’s Silverdale, attracted by the affordable land and rates and the port right next door.

According to Richter, every prospective tenant from Auckland they talk to mentions the high lease costs in Auckland city, the lack of land to grow their business, the restrictive planning requirements, the traffic congestion gouging profitability, and the fact that staff can’t afford housing near their workplace and have to commute long distances.

So, not surprisingly MMH offers benefits that address the frustrations mentioned above.

Lease costs are more affordable (as a rough guide, bare land behind the port ranges from $8 to $12 per square metre per annum). There’s plenty of available land, generally more permissive zoning, no traffic congestion, and a range of available housing – both in the immediate area and in Whangarei (30 minutes away).

Richter says MMH can consider funding the cost of purpose-built premises and improvements for tenants (allowing for this in the lease agreement) which reduces the capital outlay for tenants.

And don’t get him started on the lifestyle benefits of shifting to the sunny North. “There’s tons of recreational space that you don’t have to share with thousands of others.”

Relocating from Auckland to Northland is understandably a challenge, and requires ample planning and time. Richter says many of the businesses they are in discussion with operate high-tech enterprises, so they understand the decision is significant.

“They’re specialists in their field who recognise the need for patience and care when contemplating a move of some magnitude. And so do we.”

Well connected

One of the most popular destinations for businesses relocating from Auckland has undoubtedly been the Tauranga/Bay of Plenty region. With its variety of commercial land options, its lifestyle attributes, strategic location and accommodating and well-connected business, civic and wider communities – not to mention its efficient port – it’s hardly surprising that the region is performing so well. In both 2017 and 2018, it topped the country for both economic growth, business unit growth and employment growth.

In terms of GDP growth, Tauranga has surpassed the national average for the past 21 consecutive sectors, since 2013 (Source: Infometrics). A recent independent report by Middlebank Consulting Group identified it as the most cost-effective logistics hub in the country for many exporters and importers. It also found Tauranga offered around a five percent cost saving for product distribution around New Zealand compared with Auckland.

There is a considerable list of businesses that have made the move to this part of the country, including larger companies such as Brother International (ex Wellington), Jenkins Freshpac Systems and Zespri International (both ex-Auckland).

More recently Super Yacht coatings relocated from Auckland (see side story) and Good Buzz Beverage Co, came up from the capital.

Good Buzz leads the market with its kombucha – a non-alcoholic probiotic soft drink.

Co-founder Alex Campbell says they were looking for new premises to keep up with the demand for their product. “As we looked to expand and source a new production facility in Wellington we came up against a series of barriers and setbacks so we decided to look elsewhere.”

Tauranga ticked all the boxes, he says – the ability to scale up production, reduce distribution costs, and access local and international markets through the airport and port.

The whole team also share a love for the beach, he says, so raising a family in Tauranga was a no-brainer.

Mark Irving, business development manager for local economic development agency Priority One, says the local authorities take “a ‘red carpet’ rather than a ‘red tape’ approach” to business relocations. “They focus on supporting commercial opportunities and are very responsive if we approach them and identify things they could do to support a business.

“One of Tauranga’s unique assets is the strength of collaboration among local business and community networks, enabling businesses new to the area to meet like-minded people, stimulate growth, foster partnerships and develop new commercial opportunities,” adds Irving.

“The local community is generous in the sharing of resources, expertise, research and joint marketing opportunities with people who are driven to achieve business success. There is also a demonstrated commitment by the education sector to work alongside industry to ensure a deep talent pool.”

Just an expressway away

It’s a little over an hour’s drive from the Bombay Hills to Hamilton, and when the Waikato Expressway is fully open in around 12 months, the driving time between Auckland and Hamilton will be even shorter.

The Waikato is another boom region acting as a magnet to fed-up Auckland businesses.

In 2018 GDP growth was 2.7 percent. The Waikato is now a $20 billion economy with around half a million people living and working there.

Business is flourishing – with 570 new start-ups opening their doors in 2018 alone.

The high cost of Auckland’s land, commercial rentals and residential rents are the main drivers for businesses looking south for a solution, says Chris Simpson, CEO of the Waikato Chamber of Commerce and Industry.

“In the past decade approximately 1100 new consents for factories and industrial properties have been issued,” he says. “This has seen strong growth and demand in the Waikato for commercial investment.

“What’s more, median earnings in the Waikato from the likes of manufacturing have gone from $30,600 below Auckland’s $31,280 in 2000 to $50,940, compared to Auckland’s $50,790, in 2016. “Meaning that a person engaged in manufacturing is earning more in the Waikato than in Auckland.”

Simpson says there are a number of initiatives that Councils in the Waikato apply to attracting business. “Most [of the] attraction is done through the likes of the Chambers of Commerce and respective entities of the region’s economic development agency. The economic development managers within the Council’s teams are the ones who work closely with businesses to help them understand the opportunity within their Council district,” he explains.

“These EDMs are the front-facing business-friendly parts of Council and well worth engaging with.”

There is a wealth of data and information made available to potential investors/entrepreneurs through MBIE, he adds, as well as economic data produced by local Councils.

With the completion of the Expressway and travel between the two cities getting progressively easier, Simpson believes relocating a business to the Waikato will soon become a breeze.

Other benefits are house prices which are basically half that of Auckland, he says, and wages/salaries that pretty much match Auckland over all sectors.

“We have Raglan and the Coromandel in our backyard, which is fair to say are the best beaches in the whole world.

“The icing on the cake is that we don’t really suffer the crippling effects of congestion, he adds. “Aucklanders enjoy the carparks on the motorways; we enjoy just getting [down] to business and making the stuff the world wants!”

Article by Glenn Baker, editor of NZBusiness. This story was first published in the April 2019 issue of NZBusiness.