Capital assets

While there’s no glossing over the fact that the city has challenges ahead – largely infrastructural – the time-worn “absolutely positively Wellington” refrain is still loud and strong in the commercial property sector.

Total Property - Issue 2 2021

Significant private investment, the stability of government occupiers, a push for more inner city residential accommodation and the geographical squeeze on CBD land, are all driving the commercial and industrial property sector in Wellington.

Framed and constrained by hills and water, the capital’s city centre continues to evolve – albeit with the usual niggles that a major city faces as it flexes and grows.

Commentators are quick to home in on council tensions, new library options, discord over traffic through Lambton Quay, the broader Let’s Get Wellington Moving Again mantra, and – is the city really still the coolest little capital?

However, even with these issues and the pandemic’s throttle on the active CBD workforce, Fraser Press, a director with Bayleys Wellington Commercial, said CBD property sales volumes and values haven’t skipped a beat. Leasing activity is buoyant and heavyweight private and listed developers are proceeding with multi-million dollar projects region-wide.

“Yes, there are some hurdles, but there’s a lot of collaboration going on with private and public entities in the central city,” he said.

“The new convention centre – Tākina – is under construction near the waterfront and set to open in mid-2023, and secondary grade office stock is morphing into functional and affordable inner city residential accommodation.

“New development pipelines are triggering a flight-to-quality for large corporates who want high levels of amenity and superior seismic thresholds, and we’re seeing some interesting stuff happening in the suburbs, too.”

Bayleys’ retail sales and leasing specialist Jim Wana, said there hasn’t been a lot of vacancy occurring across the city’s key retail precincts and, aside from news that department store David Jones is exiting the Wellington market, and some real pressure on some parts of the hospitality sector, retail is pretty much business as usual.

“Despite the continuing rise of e-commerce globally, and the escalation of online platforms for established New Zealand businesses, there’s still proven demand for physical retail space.

“The major developments underway and planned in the near future for the CBD, all have a retail component at street level which creates more opportunity for smaller operators to secure space near active and growing population bases.”

Meanwhile, as Lambton Quay fronts its challenges, and continues to seek national and international brands to cement its shopping appeal, the eclectic Cuba-Manners-Willis street precinct is thriving, as independent retailers relish the opportunity to do their own thing in the company of like-minded entrepreneurs.

Press said the biggest surprise to come out of COVID-riddled 2020 was the resilience of the industrial sector which has attracted feverish attention from both seasoned and emerging investors.

“Sub-five-percent yields are commonplace now – Auckland’s industrial market trends have finally turned up here,” he said.

“And when, during lockdown, the former Imperial Tobacco site in Petone was put on the market, we collectively held our breath – before receiving a startling 15 tenders.

“Within eight weeks, we had then launched Imperial Park, a light industrial business park, with 70 units selling down in a matter of weeks – we just could not have predicted that.”

Latest figures show the Wellington economy created more job opportunities than any other region around the country in the year to December 2020, largely due to more jobs being created in healthcare and the public sector as part of the pandemic response.

Strong city bonds

Willis Bond, the development company behind large-scale commercial and mixed-use projects across Auckland and Wellington, continues to be proactively involved in the capital.

They’ve ticked off recent developments like 100 Cuba Street and the PwC Centre and have two more premium base-isolated projects on the go now – the Victoria Lane project, and the Site 9 building – its seventh major development on Wellington’s waterfront.

David McGuinness, director Willis Bond, said these latest projects are “progressing at a rate of knots”.

“We are well into the piling at Site 9 and the steel diagrid structure at the Victoria Lane site is pretty impressive.

“We’re working towards a completion date of late-2022 for Victoria Lane and mid-2022 for Site 9 – where Bell Gully is onboard as anchor tenant – and we are now seeking tenants for other large-format, flexible office floors across both projects.

“We also have another residential offering near the central city coming to the market early-2022.”

McGuinness said COVID-19 saw businesses re-evaluate workplace strategies and requirements and this has expedited some trends that were already happening in the market.

“Most businesses have indicated that while remote working serves a useful purpose, their teams ultimately want to work together most of the time.

“This means office environments will evolve, with greater emphasis on staff amenities and encouraging social interaction.”

“As well as government, every week we meet strong, growing businesses committed to the Wellington CBD.

“We remain positive about the commercial market, but aware that demands around workplace resilience, flexibility and design are changing rapidly, which presents a great opportunity.”

McGuinness said innovation, seismic integrity and sustainability are important for the city.

“Post-Kaikoura earthquake, we’ve incorporated base-isolation and low-damage design philosophies into our Wellington projects and recently worked with Greater Wellington Regional Council to support its commitment to reducing emissions by providing electric vehicle charging facilities at its new Cuba Street building via the Thundergrid management service.”

Willis Bond is also working on a resilient suburban satellite business campus at the former AgResearch site in Wallaceville, around 30 kilometres from the CBD, with occupation expected from late-2022 onwards.

“Blue Mountains Campus in Upper Hutt is an exciting regional project supported by both the Upper Hutt Council and central government and will deliver a new green and resilient commercial centre for the region,” said McGuinness.

“We’ve got strong interest from a state-owned enterprise and good interest from retail operators, which will ensure there is a strong on-site amenity for tenants.”

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