Developers told to leave out the 'ego'
Cashed-up developers should scale back their projects to make them financially viable and attractive to tenants, experts say.
The warning comes after some investors said they were struggling to make multimillion-dollar concept plans stick in the face of inflated building costs.
Cristo Ltd, a family consortium that owns a Cathedral Square site, is considering selling up after failing to secure pre-commitment from tenants because of the high rents needed to fund construction costs.
Long-time Triangle Centre landlord Michael Ogilvie-Lee recently dropped his concept for an office and shopping centre because of reluctant tenants and uncertainty over car parking.
Colliers general manager Jonathan Lyttle said developers should start building to match demand and "leave the ego out of it".
It had been a "trial by fire" for investors-turned-developers who had presumed they would immediately secure A-grade tenants - including banks, lawyers and accountancy firms - because many had already relocated.
"There's no point in investors designing A-grade buildings if there's no A-grade tenants . . . they need to engage to find out what the demand is," he said.
Lyttle was "delighted and relieved to see the central city coming together so well" and said in the next 12 months the city centre would change dramatically.
KPI Rothschild Property Group director Shaun Stockman said the firm had hundreds of commercial tenants before the earthquakes and none were classed as A-grade.
He urged developers to think about who they were building for and said while everybody wanted "the A-grade tenants with long-term leases", it was better to have several smaller tenants if it meant a building was fully leased.
Amherst Properties owner and managing director Lindsay O'Donnell said not everybody was cut out to be a property developer and mistakes were being made in Christchurch because people were not seeking expert advice and not building cost-effective designs.
"I'm concerned that people, particularly existing investors with insurance payouts, naturally think to rebuild on that site but it's a development exercise and they firstly need to look at what the market wants."
He conceded it was a "challenging environment".
"Property developers don't know where the equilibrium is . . . there are construction and consenting complexities as well as high land prices," O'Donnell said.
Christchurch developer Richard Peebles believed prices would stabilise and developers would start building more affordable developments in the city core.
"[The CBD] was always going to be like a doughnut - built from the outside in - and I don't think that is necessarily a bad thing."
Victoria St developer Richard Diver said one of his first post-quake designs was criticised for being "boxy with no windows in the sides" but not every central city building could be architecturally designed and stand out.