No one wants Aucklands Office Space
April 15, 2010 1 Comment
The office market in Auckland’s central business district is in worse shape than people realise, says Craig Tyson at ING New Zealand, which manages funds worth nearly $300 million in listed New Zealand property.
That’s clearly of concern to Tyson because office buildings account for about 60 percent of the listed property sector; industrial property accounts for about 20 percent and retail property the remainder.
While retail and industrial rents have held up well during the recession, office rents are declining and are probably going to fall further, Tyson says.
The trend for major corporates to move out of prime office buildings into campus-style accommodation at places such as the Viaduct is creating ever-rising vacancies.
Vodafone and Air New Zealand have already moved to the Viaduct while Telecom will move about 2500 staff into its new purpose-built, four-building headquarters on Victoria St next year and ASB Bank wants to move about 1100 staff out of the CBD into a new $160m development on the waterfront within three years.
Westpac and Ernst & Young are moving to Britomart and Bank of New Zealand is also moving.
ANZ National Bank, now occupying nearly half of Kiwi Income Property Trust’s 26,141- square-metre National Bank Centre on Queen St, is also rumoured to be moving.
Its lease expires in 2012.
Kiwi’s building is already 12 percent vacant.
“The trend has been around for a while but we can probably least afford it now,” Tyson says.
“Who’s going to be left in these towers?”
Chas Keogh, office leasing manager at real estate agency CB Richard Ellis, says the vacancy rate in Auckland’s CBD is officially 13.3 percent and, if taking into account sub-leases, it’s probably more than 16 percent.
Keogh agrees 2013 “is going to be a tough year for leasing”, but says the market has seen worse.
In the early 1990s, Auckland’s vacancy rate was about 25 percent and in the late 1990s climbed above 15 percent.
Keogh is clearly an optimist: “What everyone has to take into account is we had a fantastic boom. When you look at where we are now in comparison with where we’ve been, it isn’t actually as bad as people are making it out to be. There are some great opportunities.”
Forsyth Barr analyst Jeremy Simpson, who notes rival real estate agency Colliers is expecting the vacancy rate to climb closer to 20 percent, says while the rate is lower than at the same stage of the cycle in 1991, “we are arguably in worse shape from an economic and employment perspective”.
In past downturns, poor vacant space has been converted to educational uses or into apartments or short-term accommodation, Simpson says.
“It is harder to see such a saviour in today’s climate.”
Still, the super-city’s office space requirements will help and a few large non-CBD tenants are moving back from suburban locations to take advantage of lower rents and previously unavailable large, vacant contiguous floors.
“Perhaps the latter will have more of a positive impact this time around given improved public transport linkages into the city.”
Source: http://www.stuff.co.nz/business/small-business/3585130/Firms-turn-backs-on-CBD-towers
