Capital office squeeze deepens
Wellington’s tight office vacancy market has been squeezed further to a low of 5.9 per cent, the lowest since December 2008, according to Collier’s International.
In its latest Wellington CBD Office Market 2H 2019, Colliers said tenant demand and limited availability of prime office stock had led to the reduction. Its data is based on availability in June 2019.
The 5.9 per cent overall Wellington vacancy rate compares with 6.2 per cent six months ago.
Colliers director of research Chris Dibble said more space would come available over the next few years through refurbishments and seismic strengthening, and the construction of new buildings.
About 50,000 square metres of office space undergoing project works was forecast to become available over the next 12 months, Dibble said.
Colliers managing director in Wellington Richard Findlay said limited stock put pressure on rents to rise.
‘‘Low interest rates are having a positive impact on demand but the flipside is they are discouraging owners to sell.’’
Rents might be rising but so was the cost of insurance, Findlay said.
High insurance costs were pushing rents higher in Wellington.
Thorndon continued to have no vacant prime space while secondary space slipped to a vacancy rate of 1.5 per cent there from 2.35 per cent in the first half, the report said.
CBD fringe also had no vacant prime space while secondary space dropped to a vacancy rate of 4.8 per cent from 6.3 per cent in the first half.
In the CBD, core prime space dipped to a 0.7 per cent vacancy from 2 per cent in the first half while secondary space vacancy rose to 7 per cent from 6.5 per cent.
The area with most vacant space was Te Aro, around Taranaki St, at 12.5 per cent vacancy for secondary space, a slight dip from 12.66 per cent. Rents had risen in the past six months.
The range of average gross rents for prime space had risen to $483sqm to $585sqm from $472-$562 six months before.
Average secondary rents had increased to $281-$396 from $264-$381.
Colliers said about 41,000sqm of office space was under construction and 72,000sqm was proposed.
Proposed offices include a fivelevel office building, offering 4000sqm of office space, on ‘‘Site 9’’ on the North Kumutoto area of Wellington’s waterfront. That is planned by prominent local developer Willis Bond with completion expected in late 2021, its website said.
Willis Bond is also planning 10,000sqm of new office space in the Victoria Lane Office Campus, part of its Cuba Precinct development.
Some 3000sqm was expected to be available in 2022 and 7000sqm in 2023.
Listed property developer Precinct Properties is planning two office buildings at 40 and 44 Bowen St, providing more than 20,000sqm with completion projected for late 2021, depending on leasing, its website said.
An office tower building offering 17,000sqm is planned for the CBD on the Z Energy petrol station site in Whitmore St with a completion date of 2022-23.
The Government’s National Construction Pipeline Report 2019 forecasts a flat and then declining amount of non-residential construction in the Wellington region.
In 2018, the region had $700 million of non-residential construction, a 17 per cent drop on 2017. The report forecast that current levels of non-residential building were expected to be maintained in the region until 2020. After that a reduction was expected, with nonresidential building reducing to $400m by 2024.
The picture for residential building in Wellington is more optimistic. About $2 billion or more of residential building is expected each year until 2024.