Earthquakes have caused an over supply of office space in Christchurch and a shortage in Wellington, according to Colliers International’s annual NZ CBD Office Report.
The report found that the amount of new office buildings constructed in Christchurch since the 2011 earthquake meant there was now an oversupply of space in the city.
“In the Christchurch market, supply is expected to exceed demand in the short to medium term,” Colliers’ national director of research and consulting Alan McMahon said.
“As a result average prime net rents have pulled back from $395 a square metre last June to $370 this year.”
The surplus of space was likely to take several years to be absorbed by the market,” said Brynn Burrows, Colliers director of leasing in Christchurch.
“As a result, there are unlikely to be any major office development projects in Christchurch for another five years at least, unless a large tenant opts for a design and build,” he said.
The Wellington market faced the opposite problem – not enough office space.
A number of Wellington office buildings had become vacant due to seismic damage caused by last year’s earthquake in the capital, and vacant office space was almost non-existent at just 0.1% of total stock.
“This has driven up average prime gross rents which have increased 5.5% over the past year to $481 a square metre,” McMahon said.
That meant tenants were finding it increasingly difficult to find a space that suited them, and were speeding up their due diligence processes to get leases finalised as quickly as possible once they did find something suitable.
“This gives them control over the option and blocks competition from other tenants,” Colliers associate director of commercial leasing Steve Maitland said.
The report also found that the completion of new office buildings in Auckland had helped to ease demand pressures in the city, with the prime CBD vacancy rate in Auckland rising to 3.8% in June from 1.9% a year earlier.
You can check out the details of recent commercial property sales around the country on our new Commercial Property Sales page.
Here’s a link to Colliers’ full report:
You can receive all of our property articles automatically by subscribing to our free email Property Newsletter. This will deliver all of our property-related articles, including auction results and interest rate updates, directly to your in-box 3-5 times a week. We don’t share your details with third parties and you can unsubscribe at any time. To subscribe just click on this link, scroll down to “Property email newsletter” and enter your email address.