Tunnel vision

Tunnel vision

Total Property - Issue 2 2020

A record spend-up on infrastructure is poised to change the face of commercial property in Auckland’s CBD.

Transformative projects worth at least $30 billion are planned or underway, including Auckland Airport expansion, the New Zealand International Convention Centre (albeit delayed by fire damage) and major roading improvements.

The $4.4 billion City Rail Link (CRL) is by far the biggest, according to analysis from Bayleys Research.

The commercial property sector will reap big benefits as infrastructure investment feeds economic activity and employment and stimulates development and leasing activity, the Bayleys report, Infrastructure: Driving real estate opportunities concludes.

Its authors point out that “improved road and rail networks, strong telecom systems and efficient and affordable utilities such as electricity and water are fundamental to most real estate developments”. Urban rail improvements can stimulate commercial property demand, development and leasing activity around stations.

Infrastructure New Zealand’s chief executive, Paul Blair, says the $366 million of extensions to the Northern Motorway between 1995 and 2000 delivered an estimated $2.3 billion in gross benefit to Rodney and the North Shore. An investment of $610 million in upgrades to the city’s western rail line brought $667 million in benefits, Blair says, also pointing to billions of dollars of commercial property development sparked by the CRL.

“In all three of these, the benefits almost 100 percent went to private land holders,” he says, though the Government is talking about “value capture” measures by which owners would pay for some of the cost of major developments.

On completion in 2024, the CRL will turn Britomart from a dead-end station to a through station, opening onto a new 3.4-kilometre underground rail link connecting with the existing network at a redeveloped Mount Eden Station.

By doubling the number of Aucklanders within a 30-minute commute of the CBD, it will bring a step-change in CBD-based employers’ access to workers.

This will further boost development and demand for office space and create new patterns of leasing – particularly around new growth nodes centred on CRL stations.

Two new underground stations are being created: Aotea Station at Wellesley and Victoria streets; and a station at Karangahape Road. Together with redeveloped Britomart and Mount Eden stations, these sites are attracting development that will turn them into vibrant mixed-use hubs.

Delivery body City Rail Link Limited (CRLL) estimates total development potential of 200,000 square metres at the new stations – including offices, apartments, retail and hotels.

Precinct Properties’ $1 billion-plus commercial, retail and hotel development is taking shape at Commercial Bay, beside Britomart.

At its heart stands the new 39-storey, 39,000-square metre PwC office tower. Its tenants will include PwC, whose staff will move from the existing PwC Tower on the corner of Albert and Quay streets, along with law firms Chapman Tripp, DLA Piper and MinterEllisonRuddWatts.

Precinct says 10,000 office workers will occupy space in this and adjoining buildings it owns, including the existing PwC Tower, AMP Centre, Zurich House and HSBC House.

The Aotea Station site has around 5,000 square metres of developable land owned by Auckland Council, with land resource consent secured for a 41,000-square metre office tower above the main station entrance on the corner of Wellesley Street and Mayoral Drive.

CRLL’s post-construction development scenario envisages office accommodation for 3,000 people, including a second commercial tower to the south.

While commercial property concepts are less well-defined for other stations, CRLL says that post-CRL construction, land acquired at Mount Eden Station will provide potential for 100,000 square metres of investment. This includes housing for 2,300 within the station area. There is another 16,000 square metres of development potential on adjacent land owned by CRLL.

Karangahape Station will have an over-station development, on a site with about 2,600 square metres of developable land owned by CRLL.

Bayleys’ Auckland commercial and industrial director, Lloyd Budd, says the CRL will add fuel to the CBD’s commercial property transformation.

“Development of new office space is well-advanced towards the downtown and Wynyard Quarter areas, continuing a gradual northward and westward drift of CBD activity.

“The CRL will promote new patterns, with attention extending to growth nodes around stations further uptown, and potentially along Albert Street, as its importance grows as a commercial office spine, as well as Newmarket and Eden Terrace.

“Older, B- and C-grade stock in midtown and uptown areas will attract a second look as savvy landlords upgrade their offering to reflect tenant demand.

“Though some has been vacated and repurposed for residential accommodation, rising demand from commercial tenants is likely to see the delivery of significant amounts of upgraded and new office space.”

Launching consultation on a revamp of Auckland’s City Centre Masterplan late last year, council planning committee chair Chris Darby acknowledged the need to respond to rapid growth and evolving patterns of development.

“The city centre is changing dramatically. Right now, there is $16 billion of private and public investment underway,” he said.

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