Earthquakes have caused a surplus of office space in Christchurch and a shortage in Wellington

Earthquakes have caused an over supply of office space in Christchurch and a shortage in Wellington, according to Colliers International's annual NZ CBD Office Report.

The report found that the amount of new office buildings constructed in Christchurch since the 2011 earthquake meant there was now an oversupply of space in the city.

"In the Christchurch market, supply is expected to exceed demand in the short to medium term," Colliers' national director of research and consulting Alan McMahon said.

"As a result average prime net rents have pulled back from $395 a square metre last June to $370 this year."

The surplus of space was likely to take several years to be absorbed by the market," said Brynn Burrows, Colliers director of leasing in Christchurch.

"As a result, there are unlikely to be any major office development projects in Christchurch for another five years at least, unless a large tenant opts for a design and build," he said.

The Wellington market faced the opposite problem - not enough office space.

A number of Wellington office buildings had become vacant due to seismic damage caused by last year's earthquake in the capital, and vacant office space was almost non-existent at just 0.1% of total stock.

"This has driven up average prime gross rents which have increased 5.5% over the past year to $481 a square metre," McMahon said.

That meant tenants were finding it increasingly difficult to find a space that suited them, and were speeding up their due diligence processes to get leases finalised as quickly as possible once they did find something suitable.

"This gives them control over the option and blocks competition from other tenants," Colliers associate director of commercial leasing Steve Maitland said.

The report also found that the completion of new office buildings in Auckland had helped to ease demand pressures in the city, with the prime CBD vacancy rate in Auckland rising to 3.8% in June from 1.9% a year earlier.

You can check out the details of recent commercial property sales around the country on our new Commercial Property Sales page.

Here's a link to Colliers' full report:

PDF iconCBD Office Report 2017.pdf

You can receive all of our property articles automatically by subscribing to our free email Property Newsletter. This will deliver all of our property-related articles, including auction results and interest rate updates, directly to your in-box 3-5 times a week. We don't share your details with third parties and you can unsubscribe at any time. To subscribe just click on this link, scroll down to "Property email newsletter" and enter your email address.

 

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

4 Comments

Time to for government and businesses to move south to take advantage of the ample, high-quality office space and cheaper housing.

Let me think. Christchurch has had its earthquake; Wellington is yet to have theirs. There's excess office space in ChCh and not enough in Welly. Hmmm.... Move Government to Chch you say?! Are you mad! Don't you know what that would do to the price of property; property heavily invested in by our political class, in our Capital City.....

It has been a tough 7 years for Greater Christchurch but finally many economic fundamentals -rents, housing costs, cheaper office space, cheap industrial land and a relatively large market of approx 1/2 million is beginning to assert itself.

Chch has a terrible problem.
There are still many, many, vacant lots in the CBD. The CBD is on soft soil (zoned TC3) and buildings need very, very substantial foundations which are extremely expensive, especially for multi-storey buildings.
Many large firms(i.e. lawyers etc) have set up their offices outside the CBD, many in Addington and are paying half the rent that is asked in the CBD and offer plenty of car parks for their clients. They are in no hurry at all to return to the CBD.
So existing office rents in the CBD is falling to attract the lessees to such an extent that the building value drops below the cost value. (commercial building value is determined by the amount of rent that is paid) So developers are not interested in building any more commercial buildings in the CBD and even the banks are not interested in lending for new commercial developments as the risk of being 'upside down" is too high.
It's a terrible situation, nothing gets built anymore in the CBD and the town center is DEAD