Wellington commercial leasing picking up
After a period of stagnation, Wellington commercial property landlords are finding demand rising again.
Last month was one of Bayleys Wellington branch's busiest leasing periods in recent times, with 14 transactions concluded across the market.
And earlier this month, Bayleys concluded what was likely to be one of the year's biggest industrial leases, a 3,300sq m warehouse and office building in Meachen St, Seaview, to New Zealand Post for nine years.
Mark Hourigan, managing director of Bayleys Capital Commercial, said the increased number and variety of leases was a reflection of the broad-based recovery over the Wellington region.
"It's been a long time coming, following seven hard years of little business growth and a battening down of the public sector by a Government determined to balance its books."
Hourigan said Wellington was a fairly conservative investment environment and it generally took longer for things to turn around than in Auckland.
"But there's been a noticeable improvement in the mood of the market since the latter part of last year and pent up demand is coming to the surface."
Tenants were now having to compete for space, not only with each other but with businesses looking to buy rather than lease.
Industrial properties had led the way, with vacancy rates falling for the last two years, but there was also strong demand for top-grade retail space, with Briscoes, Bunnings and K-Mart recently committing to substantial new stores.
Large-scale office leasing was subdued but the smaller to medium sized end of the market was active again, said Hourigan.
Economists say that the outlook is good, with the New Zealand Institute of Economic Research forecasting the city's economy will grow 3.1 per cent on average over the next five years.
A national construction report also predicts the value of building and construction activity in Wellington is expected to grow by 38 per cent between 2012 to 2019. The national average was 32 per cent.
Of particular encouragement to the commercial property sector is the fact that non-residential Wellington construction activity is forecast to surge ahead by 49 per cent during those years, on par with Auckland.
Hourigan said that if those forecasts came true, a further tightening of the supply of commercial and industrial premises was on the cards and also increased competition for business space until supply caught up with demand.
Matt Hince, CBRE's national director of office space, said there was "unquestionably" more cause for bullishness this year than there had been for a while.
A major reason for optimism was the Government's plans to rationalise its office space, involving many tens of thousands of square metres and freeing up good A and B-grade space for others.
"There's going to be more volume of leasing this year than we've seen for a number of years," said Hince. "And that's great because it causes momentum and movement and liquidity in the market."
Some of Bayleys' significant leasing transactions in March:
- Six Wellington CBD office leases
- A part-floor of character space in the Dominion Building to film production company The Gibson Group.
- The former Bond and Bond store in Porirua Mega Centre
- A three-year lease of restaurant space in Cuba St.
- 376sqm of office space to the Hutt Valley District Health Board in Upper Hutt's Main St
- 1073sqm of industrial space was rented to a construction company in Port Road, Seaview
- 444sqm in Victoria Street, Petone to Mind Lab
- 698sqm in the Kapiti Landings business park in Paraparaumu