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Bayleys Research


CHRISTCHURCH REGIONAL FOCUS 2010

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IMPLICATIONS OF THE EARTHQUAKE

A majority of this report was drafted prior to the September 4th earthquake and it remains a little soon to fully assess its ultimate impact on the local commercial property market and the regional economy.

Notwithstanding the above the early opinion from Bayleys agency team on the ground is that the industrial sector has not been overly affected as it relates to physical building damage within the main industrial precincts therefore there is no significant immediate requirement for new build premises, however there has been an estimated 40,000m2 of temporary Industrial accommodation takenwhile building and fit out repairs are effected and this has obviously impacted on some of the industrial vacancy surplus, albeit short term. Longer term there is a emergence of a positive impact upon occupier demand as businesses gearing up to be involved in reconstruction projects take on additional space.

It is the commercial office and retail sector which is likely to be the most affected with a majority of the commercial property damage having occurred in the CBD. It is still too early to accurately estimate the full effects upon office inventory through demolition and therefore on the requirement for new lettings. It is clear however that the major impact will be on lower quality space where vacancy rates were already relatively high, upwards of 10% for B grade space and 15% for C and D grade space. It is possible therefore that the long term impact will not be as great as initially thought.

Requirements for short term leases, allowing for building repairs to be carried out, are becoming apparent with the temporary letting of 5,000m2 of space at Show Place Office Park to Westpac and AMI being a prime example.

Economically there is no doubt that the short term implications are going to be negative as many businesses are forced to keep their doors closed for a period of time. Those businesses and individuals whose buildings have suffered damage will be responsible for meeting insurance excesses at the very least which will curtail expenditure elsewhere.

Looking to the longer term however,economic commentators seem agreed that the economic benefit will be positive overall with local and national GDP boosted, particularly as a result of significantly increased activity within the construction and infrastructure sectors. The ANZ Bank’s initial estimate for example is that the aggregate net impact on GDP will be +0.5% over the next two years as illustrated in the adjacent table.

 

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