Earthquake protection costs to soar
Rental costs in Wellington’s new earthquake-resilient buildings are tipped to top a record $800 a square metre because of high building costs.
Wellington leasing specialist Steve Maitland at Colliers International said gross rents – rent and operating costs – could tip over $800 per sqm for brand new, seismically resilient and efficient office buildings.
Some of the highest gross rents in the core CBD now were late $600s but no-one was yet paying $800sqm metre in an existing building, he said.
People were prepared to pay for safe, modern and efficient buildings as well as for views and outlook.
An economic rent was required to kickstart a development and cover a continual increase in build costs as well as the rising cost of insurance and rates, Maitland said.
Leading developer Willis Bond is planning a new five-level, baseisolated building for Wellington’s waterfront on ‘‘Site 9’’ near the PwC Centre, which it built also.
‘‘The building’s state-of-the-art base-isolated structure will provide seismic performance significantly greater than typical Wellington office buildings.
Specially-designed foundations will provide ground improvement designed to prevent liquefaction and mitigate the potential for lateral spreading,’’ the Site 9 website says.
The four upper levels would have Grade A office space and 900sqm floor plates.The facade would be extensively glazed providing a lot of natural light and views over Wellington’s harbour and cityscape.
The two top levels has been leased to a blue chip tenant and levels 1 and 2 were available for rent from September 2021.
‘‘New buildings by definition typically set new rental benchmarks due to construction cost inflation,’’ David McGuinness, Site 9 project director, said.
‘‘In addition to this, a baseisolated building is a more complex structure than a conventional building.
‘‘Two independent platforms are created with lead rubber base isolators in between. This allows the main building structure to be less affected by the movement of the ground, and delivers a level of safety and resilience that greatly exceeds other new buildings.
‘‘These type of buildings are key for the future resilience of the city. Currently, there is an additional cost of around 10 per cent to build them, but our team and the wider industry are looking at ways to reduce this premium.’’
Maitland said two new buildings proposed for the Bowen Campus at 40 and 44 Bowen St in the Government sector were likely to rent at about the mid-$600 per sqm.
Precinct Properties has said they would be the first new builds in Wellington to employ ‘‘fluid viscous dampers’’ in the structural frame. The technology was common in California and Japan and worked like shock absorbers on a car.
Maitland said Wellington CBD had been achieving rent in the $600s for existing buildings 25 to 30 years old but it was not common. Demand had strengthened after the November 2016 Kaiko¯ura earthquake took several Wellington buildings out of the market.
In Auckland, gross rents were already in the mid $800 per sqm in top new developments such as the Commercial Bay office and retail development on the Auckland waterfront and new Wynyard Quarter buildings, he said.
A new base-isolated building, Deloitte building, at 20 Customhouse Quay, was reputed to have gross rents in the late $600 per sqm.
Tenants had been in that building for more than a year but the leases were committed to well before that.
The rents might have seemed high back then but the office market in Wellington was quite different now.
Tenants were looking at less space per worker these days – 11sqm and even 8sqm – down from 15sqm a few years ago so that helped affording the higher rents, he said. More workers could be accommodated into more modern spaces.
Desks were often smaller than they used to be and each worker had less storage as they were supposed to be printing less and storing ‘‘in the cloud’’. Certain areas might be used for meetings rather than having separate rooms.
Larger floor plates were helping these open office trends. The last two buildings constructed in Wellington – Deloitte building and PwC Centre at 10 Waterloo Quay – had floors between 1260sqm and 2200sqm.
Wellington’s overall office vacancy rate of 5.9 per cent was an 11-year low but about 50,000 sqm of office space undergoing project work was likely to be available over the next year.
Over the next few years there should be some relief for tenants with more building refurbishments and strengthening and construction of new buildings.