Coffee shops hot property for commercial real estate owners

Coffee shops hot property for commercial real estate owners

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Per capita, New Zealand has one of the highest rates of coffee consumption in the world, with Kiwis drinking 0.94 cups of coffee a day – more than Australia and the United States.

It’s no secret that Kiwis love a good cup of coffee. And with more than 200 roasters grinding daily, New Zealanders are spoilt for choice.

While that’s good for coffee drinkers, it is also hot stuff for commercial property investors, landlords and sellers.

Bayleys national director commercial John Church said Kiwis’ coffee habits had given birth to new retail trends and use of property – from cafes based in the foyers of office buildings, and ‘hole in the wall’-style outlets in high foot traffic areas, to mobile vans and street-side caravans.

“The success of premium price coffee capsules and the uptake of espresso machines has seen coffee giant Nespresso occupy space on the high street alongside high-end retailers.

“In Auckland’s Queen St, Nespresso rubs shoulders with Louis Vuitton, Christian Dior and Prada.”

Coffee shops hot property for commercial real estate owners

Raglan Roast on Abel Smith St, Wellington serves what some of the cheapest coffee in the city.

Many micro-roasters had seen the value of setting up shop in the suburbs, where property costs could be lower than in city centres, Church said.

Karla Gichard​, president of the NZ Specialty Coffee Association and chief executive of Ozone Coffee Roasters in New Plymouth, said coffee roasters’ property needs depended on the size of the operation and the business model.

“The majority of roasters in New Zealand are micro or small roasters and are unlikely to have the capital to buy a property, so will typically seek out spaces in good locations for lease.

Coffee shops hot property for commercial real estate owners

In Auckland, coffee shops rub shoulders with Louis Vuitton, Christian Dior and Prada.

“The larger, more established roasters may have more available capital to fund property purchases.”

Gichard’s business, which is one of New Zealand’s largest provincial coffee roasters, leases its roasting space.

“Most roasters generally only need one wholesale roasting site, depending on roaster capacity. Ozone Coffee Roasters has roasting operations in New Plymouth and London,” she said.

Coffee shops hot property for commercial real estate owners

Ozone Coffee Roasters chief executive Karla Gichard says while New Zealand is "highly saturated with roasters", there is still room for more.

“From these premises, we can supply customers in New Zealand and Europe.

“Some operators are purely wholesale roasters, while others compliment the wholesale business with a retail cafe component or roast purely for their own business.”

Although New Zealand was “highly saturated with roasters”, there was still room for growth, and new roasters would continue to enter the market, Gichard said.

However, she predicted there would be consolidation in the industry as businesses matured and began seeking to grow through acquisition or mergers, she said.

Per capita, New Zealand has one of the highest rates of coffee consumption in the world, with Kiwis drinking 0.94 cups of coffee a day – more than Australia and the United States.

Kiwis spend, on average, $13.67 a week on coffee from coffee shops, and, according to research, most will go out of their way to get the best cup possible.

Church said property could also be deciding factor in how much Kiwis pay for a cup of coffee.

Raglan Roast, which serves up to 8000 cups of coffee a day from nine stores across the country including Wellington, charges as little as $2.50 to $3 for a takeaway coffee.

The owners’ decision to buy the properties, rather than lease, has helped keep costs down.

Company founder Tony Bruce said: “Years ago, all the old-school business guys would have said something like, ‘Stick to your roasting and worry about the property side of your business’.

“But I think tenure is important, and that committing to a site is better than leasing it. And by owning the property, you also have the option to lease it out if your own business turns to custard.”

There was just a few percentage points difference between buying a property and leasing it, Bruce said.

“I feel more comfortable calling the shots. And funnily enough, a lot of those same old school business guys are all now advocating owner-occupy.”

Raglan Roast has been running its logistics operation out of Raglan, but is now moving that side of business to an industrial space in Hamilton’s commercial hub of Te Rapa.

“Initially, shipping coffee beans into Raglan wasn’t a problem. We weren’t dealing with huge numbers of pallets – it was all very low key,” Bruce said.

“But now we are feeding nine stores – with more to come – and it’s all got very complicated…

“It’s a pretty big play for us in terms of real estate but we believe in the site and the area. All our future growth is covered by that one site.”

Coffee and cafes have even usurped the company meeting room, with one sixth of Kiwis now regularly holding business meetings in a local cafe.