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Bayleys Research


ANNUAL 2007 ROTORUA REGIONAL FOCUS REPORT

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Lift in Quality of Office Sector

An upgrading of Rotorua’s office accommodation is underway as increasing tenant preference for quality accommodation is forcing landlords to refurbish or redevelop older premises in order to attract tenants.

An example of this trend and the leasing success it can bring about is the Barkers building on the corner of Tutanekai and Pukuatua Streets, which underwent extensive redevelopment with approximately 460m2 of the first floor office space constructed last year now partly leased. Approximately half of the first floor has been let to a government tenant. First floor refurbishment of 1231 Hinemaru Street is also underway in order to attract more leasing opportunities.

While lifting the quality of office accommodation has helped to generate leasing enquiry, it has also helped to stimulate rental increases as landlords look to receive adequate returns for the investment cost of refurbishment. For prime quality space rents now range between $180 and $350 per square metre per annum compared with $120 and $200 per square metre recorded 12 months ago.

 

Investment activity over the last 12 months has been steady as a result of the paucity of investment property being brought to market. The refurbishment of office space being undertaken in the CBD has also attracted purchasers even before the space has been occupied. By way of example, the old State Insurance building at 1189 Hinemaru Street has sold vacant through Bayleys Rotorua, in conjunction with Bayleys Real Estate Limited in Auckland, for around $3 million after refurbishment of three of its floors. Further evidence of the enquiry being generated by quality property in the Rotorua office investment market is Paccioli House which was sold by Bayleys Rotorua in March 2004 with a yield of 8.4% and was recently on-sold for $1.855 million at a yield of 7.4%.

While recent development activity has been hindered by rises in construction costs and development levies, the Parklane development on the corner of Fenton and Pukaki Streets looks to provide the CBD with a new standard of office space. Designed by Darryl Church Architecture, the mixed use development comprises three first-floor offices of around 200m2 to 280m2 or if required two office spaces can be combined to accommodate businesses of up to 425m2.

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