Insurance money fuels commercial property surge
Central Christchurch commercial property vacancies have soared to about 25 per cent as the postearthquake rebuild peaks.
Valuers at real estate agencies JLL and Colliers have confirmed the figures, with JLL valuer Tom Burrows expecting vacancy levels to go even higher before reducing after 2017.
But this doesn’t mean a wave of developers are likely to go bust.
Burrows agrees with Colliers valuer Gary Sellars that earthquake insurance money has given some developers and owners a level of comfort they wouldn’t otherwise enjoy.
The same amount of development would not be possible in Wellington or Auckland if developers presented a business case to banks in those cities, Burrows said.
Owners who had built with insurance money would cope with some vacancy for a while. ‘‘It’s a little bit scary on the numbers because I think it could peak as high as 30 per cent by mid-2017.’’
However, Burrows expects much of the excess space will be absorbed over the next few years based on the average annual uptake of about 30,000 square metres a year.
Colliers International’s director of office leasing in Christchurch, Brynn Burrows, said landlords preferred to offer a period of free rent as an incentive, rather than reducing rents.
Burrows said recent leasing deals include Meridian taking two levels in one of the Awly buildings on the demolished Amuri Courts site at 289 Durham St opposite the Provincial Chambers.
The development comprises three interconnected buildings.
A considerable amount of space in the buildings being completed was already pre-leased.
‘‘In 18 months the inner city is going be a vibrant place to be as these buildings are completed,’’ Burrows said.
This year will see delivery of more than 80,000sqm, excluding the Government’s justice precinct development (relocating courts and associated staff), according to an agency report.
Total central business district stock sits at about 215,000sqm compared with 400,000sqm before the quakes.