Rebuild leaves Christchurch with a glut of office space, while Wellington's vacancy falls close to zero
Office space markets in two of New Zealand's largest cities are facing opposite pressures, a new report shows.
The latest Colliers International CBD Office Report shows Christchurch now has a surplus of office space as the central city rebuild winds down, while seismic issues have left Wellington with almost no available prime space.
Colliers International research and consulting national director Alan McMahon said the ongoing effects of last year's quake continued to place pressure on the capital's central city office market.
There had been a significant reduction in Wellington office stock and a "noticeable tenant churn" over the past year, he said.
"Virtually no prime stock is available, with only 0.1 per cent vacant, as a consequence of buildings being removed from the total stock due to seismic damage," McMahon said.
"This has driven up average prime gross rents, which have increased 5.5 per cent over the past year to $481 a square metre."
Colliers International Wellington commercial leasing associate director Steve Maitland said tenants were finding it increasingly difficult to find the perfect option.
"Once they overlay their requirements for seismic, size, location and budget, there may be very few realistic properties to consider, of which one is a standout and the remaining properties require compromises.
"Tenants who are able to do their 'homework up front' and work though their internal approvals in a timely manner are nimbler when dealing with the reduced capacity and the competition from other tenants."
Meanwhile in Christchurch, Colliers International Christchurch commercial leasing director Brynn Burrows said the existing office surplus was likely to take several years to absorb.
"As a result, there are unlikely to be any major office development projects for another five years, at least, unless a large tenant opts for a design build."
There was strong demand from smaller companies wanting to be in the city, Burrows said.
"However, these firms don't have many options, as developments to date have focused on larger floor plates, many of which can't be easily subdivided.
"This has created a potential opportunity for the sale or lease of smaller units."
A large number of office workers now in the central zone had boosted the retail and hospitality sectors, he said.
"A number of large retail stores have opened recently, while The Terrace hospitality precinct is due to open at the end of the year.
McMahon said, overall, the report painted a positive picture of New Zealand's office markets.
Provisional figures showed there had been $1.5 billion of office sales of buildings, worth $5m or more, in the year to June 2017. This outpaced industrial and retail sectors.
"Office sales are much stronger than the other commercial property sectors, and investor confidence remains high," McMahon said.
"There is plenty of buoyancy in the market."