WELLINGTON'S BROAD BASED RECOVERY
Business leasing activity is a good barometer of the state of a region’s business and economic environment.
In this respect, it is encouraging to report that Bayleys Wellington had one of its busiest leasing months in recent times in March, with 14 transactions concluded across all sectors of the market. These included six Wellington CBD office leases, with two on The Terrace at gross rentals of between $250 and $280 a square metre and a part floor of character space in the iconic Dominion Building to film production company The Gibson Group.
Other leases included 376m² of office space to the Hutt Valley District Health Board in Main Street, Upper Hutt; 1,073m2 of industrial space, plus 16 car parks, in Port Road, Seaview to a construction company; the short term lease of the 664m² ex Bond & Bond store in the Porirua Mega Centre; and a three-year lease of 150m² restaurant space in Cuba Street.
In early April we concluded what is likely to be one of the year’s biggest industrial leasing transactions, a 3,300m2 warehouse and office building in Meachen Street, Seaview leased to a State Owned Enterprise for nine years at a net annual rental of $390,000. Also negotiated recently have been three other industrial leases of 698m² in the Kapiti Landings business park in Paraparaumu,1,421m² in Barnes Street, Seaview and 1,878m² in Eastern Hut Road, Lower Hutt, along with a 444m² commercial lease in Victoria Street, Petone.
The increased number and variety of leases concluded is a reflection of the broad based recovery that is occurring across the Wellington region at present driven by business expansion. It’s been a long time coming, following seven hard years of little business growth and a battening down of the public sector by a government determined to balance its books.
Wellington has a fairly conservative investment environment and it generally takes longer for things to turn around than in Auckland. But there’s been a noticeable improvement in the mood of the market since the latter part of last year and pent up demand is coming to the surface. Tenants are now having to compete for space, not only with each other but with businesses pursuing the owner occupier option of buying rather than leasing premises.
As our article on the next page indicates, the recovery has been led by the industrial market, where vacancy rates have been declining for the past two years. In the retail sector, well located A Grade space is in strong demand and it is pleasing to see a number of leading retailers such as Briscoes, Bunnings and K Mart recently committing to substantial new stores. Large scale office leasing activity remains subdued but the smaller to medium sized end of the market is active again.
Perhaps most importantly, this looks as though it will be a sustainable recovery, with the New Zealand Institute of Economic Research forecasting Wellington’s economic growth will accelerate to an average of 3.1% pa over the next five years.
The value of building and construction activity in Wellington is expected to grow by 38% from 2012 to 2019, according to a National Construction Pipeline report released late last year. This is above the forecast national average increase of 32% and contradicts suggestions that Wellington is shrinking and/or dying. Of particular encouragement to the commercial property sector is the fact that non-residential Wellington construction activity is forecast to surge ahead by 49% from 2012 to 2019, a similar rate of growth to that projected for Auckland.
If these forecasts come to fruition, there will be a further tightening of the supply of commercial and industrial premises and increased competition for business accommodation given there is traditionally a lag between an increase in demand and new supply coming on stream. We would therefore encourage any businesses contemplating expansion or relocation to act promptly.
To assist tenants with their selection process, Bayleys Wellington has launched this new Wellington Leasing Focus publication backed up by a strong online presence. It features a wide range of office, industrial and retail leasing options in a variety of locations. Bayleys Wellington’s experienced team of leasing specialists can help you find the best possible accommodation match for your business requirements. We look forward to being of assistance to you.
Bayleys Capital Commercial