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Bayleys Research


UPPER SOUTH ISLAND PROPERTY FOCUS

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CHRISTCHURCH OFFICE

While CBD office vacancy rates have edged up from the record low levels recorded in 2005 they remain at historically low levels according to the results of Fright Aubrey’s annual office vacancy survey.

Overall vacancy in the CBD increased by approximately 2.5 percentage points to sit at 13.2% a level which has been bettered only twice since 1993.

As is common throughout New Zealand’s major commercial centres strong tenant preference for higher grade office accommodation has in recent years driven the vacancy rates for A grade space sharply downwards. The latest survey shows vacancy within A grade offices has remained at below three percent for four consecutive years having been at 8% at the turn of the century.

The high levels of occupancy recorded within the highest rated office space are hardly surprising given strong tenant inquiry and paucity of supply. The Fright Aubrey survey shows that A grade space accounts for only 8.4% of the CBD’s office stock with 70%, being made up of B and C grade space.

The combination of high occupancy and limited high end product has resulted in rents increasing, with CBD A grade space now demanding rentals of up to $270 per m2. The trend towards higher rents is also reflected in the suburbs where space within the Hewlett Packard building, located in Show Place, has achieved rents of up to $260 per m2.

The increase in CBD office vacancy rates has in part been caused by a drift to the suburbs which has been increasingly evident over the last ten years. The move is illustrated by the relocation of IAG from the CBD to Show Place Business Park in Addington.

The fringe suburbs offer cheaper land and therefore developers do not require the rental levels that they would in the city to make developments financially viable. This in turn has placed a cap on CBD rentals with even A grade space unable to break through the $270 /m2, level according to the results of the Fright Aubrey survey.

The appeal of the suburbs is being added to by the development of business parks which afford occupiers high specification office space, set in landscaped surrounds with a generous car parking allocation. The Show Place Business Park has, in addition to IAG, attracted national and international companies such as Hewlett Packard, Transpower and Solid Energy.

Further development in Addington is currently underway at the Raceway while Calder Stewart are developing the Hazeldeane Business Park on a 2.32 hectare site on Lincoln Road which when complete will comprise 18,000 m2 of business space which is likely to command rentals in the region of $225-$230 /m2.

The newly developed business park space is frequently now making use of sustainable building technology, which allows for efficient use of power providing occupiers with operational cost savings.

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