Commercial property’s unsung hero

How New Zealand’s public sector is leading the way in commercial real estate

Total Property - Issue 7 2017

The public sector is one of commercial real estate’s unsung heroes. You might not know it, but it is driving the development of some world-class commercial projects.

For the commercial real estate industry, the public sector represents an opportunity to better New Zealand's towns and cities, and provide significant savings for government, both at a national and local level.

At the same time, government drives to make the public sector’s property portfolio more efficient could release significant buildings in prime locations for redevelopment.

The Government Property Group (GPG) has been driving more effective use of the Crown's property portfolio

Since its inception, the GPG has helped leading government agencies avoid approximately $200 million in rental and facilities management costs by reducing the size of the Crown's property footprint by 179,421m2, including a reduction of over 27,128m2 in 2016 alone.

The amount of space occupied per person in Crown accommodation sits at 17.7m2 - on par with the private sector, which is 17.2m² per person - and close to the Crown's goal of 12.16m² per person.

The GPG says the Government is leasing better quality space, which has enabled more efficient workplaces, particularly in Wellington and Christchurch, where occupation of less efficient accommodation has decreased.

The need for greater efficiencies is also driving thinking at a local government level.

Auckland Council head of corporate property Rod Aitken says council is in the process of reviewing its corporate office accommodation. “Our starting point is our customers and the communities they live in. We want to first focus on what good service looks like to them, and how we deliver consistently relevant services to our communities in a way that’s not limited by the locations of our corporate buildings.”

He adds: “From a property perspective, we want to shift the focus from the more traditional ‘bricks and mortar’ approach, to delivering greater reach into our communities by leveraging the latest agile technology. We've invested considerable effort to empower our staff, through the roll out of mobile computing devices, to enable our staff to work closer to our customers than ever before.

“To support our agile workforce, we are reviewing opportunities to centralise office space in the regions and leverage Auckland Council’s many community facilities and local board offices to create drop in work spaces across all of Auckland. This approach will allow our digitally enabled workforce to reach deeper into the communities and be more responsive to individual customer needs.”

This change will inevitably lead to a reduction in Auckland Council’s corporate property footprint. “A lot of the property Auckland Council owns is very specialist, such as swimming pools and parks, and the council is an expert in those fields,” Mr Aitken says.

“Office accommodation is a little bit different, in that the market provides that very well. So, there's an opportunity to release ourselves from the burden of some of the workplaces we own. Going forward, we have to decide how much we own and how much we lease. We will certainly look to the market to help us with that decision-making.”

Consolidation, however, isn’t just about shrinking the public sector’s property footprint simply to save money. It’s about ensuring government, at a local and national level, can respond to the needs of society. This has led to the creation of world-class commercial projects, driven by local authorities and the Crown in partnership with major property developers.

Auckland Council, through its development arm, Panuku Development Auckland and its economic development agency, Auckland Tourism, Events and Economic Development (ATEED), have been driving the regeneration of Wynyard Quarter, west of the city centre harbour front.

Panuku and ATEED partnered with listed commercial property developer Precinct Properties to develop the Wynyard Quarter Innovation Precinct, with GridAKL at its heart. Auckland Council invested more than $30 million in the project. It also sought guidance from the real estate and business sectors to ensure the hub's success.

In Christchurch, the impressive Civic Building – Te Hononga - is the result of a successful public-private partnership between the council and Ngāi Tahu Property.

The former NZ Post mail centre in Hereford Street was redeveloped by Ngai Tahu Property for the joint venture which opened in 2010. Ngāi Tahu Property retained 50 percent ownership of the building and manages the facility on behalf of the partnership.

With 23,000m² of offices, civic chambers and function rooms, the building houses more than 1,200 council staff and was the first office building in New Zealand to achieve a 6-Green-Star Office Built rating. It has also achieved a 6-Green-Star rating for design and interiors.

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