CBD office glut gone, agents say

Christchurch no longer has an oversupply of prime CBD office space, real estate agents say.

Most of the new office buildings in the CBD have been leased with pockets of vacant space left to fill.

Colliers International director of office leasing in Christchurch Brynn Burrows said smaller tenants were looking for good deals now that office rents had fallen in Christchurch.

Office rents had been initially north of $400 a square metre in the new buildings and had fallen back to the mid $300s.

Landlords were prepared to offer incentives and be more flexible over lease terms, he said.

Contrary to popular belief there was not a glut of quality CBD office space, Burrows said.

Incentives being offered by landlords included cash contributions to fitout, rent holiday periods and help to pay to terminate a lease.

Colliers was running a campaign to attract smaller tenants into the CBD where several of the new commercial buildings had smaller footprints to lease. The campaign included 15 buildings, 13 of which were in the CBD.

‘‘The city market is changing. Landlords initially focused on the large anchor tenants, but they’re now turning their attention to filling the final smaller office vacancies in their buildings,’’ Burrows said.

Inquiry was coming from tenants looking for between 50sqm and 250sqm, Burrows said.

Smaller tenants were more price sensitive than major corporations but ‘‘prices have come back and they’re becoming more realistic for these smaller tenants’’, he said.

The buildings with spaces to fill included Deloitte House, the ANZ Centre, Lichfield Lanes buildings and the Boxed Quarter on the corner of St Asaph and Madras streets.

Prime CBD vacancy rates in Christchurch had fallen to 5.7 per cent in the September quarter from 6.8 per cent in the June quarter, a report by real estate firm JLL said.

Of the 17 office buildings in the Christchurch CBD that JLL analysed, most were after the earthquakes.

JLL said that after the completion of the Spark building development in Cathedral Square, expected in 2019, there were no other major CBD projects scheduled in the short term.

‘‘We expect space in the CBD will continue to be gradually taken up, leading to a further decline in vacancy,’’ the review said.

JLL commercial sales broker Hamish Stallworthy said he did not think Christchurch’s CBD had a glut of office space. The rebuild had produced some sharp office buildings that had leased up well over the last two years.

Of the 17 buildings, five had vacancies, with the the Grand Central having the most space – two upper floors with very large floor plates of 2250sqm each were available. Stallworthy said the Awly building had about 1600sqm of space available.

One of the main questions prospective tenants asked when returning to the CBD was what car parking was available, after they had enjoyed a lot more parking space in the suburbs.

‘‘Tenants are very used to having good car parking ... and coming to a solution to that seems to be critical in terms of getting them to move back into town.’’

Rents across the city were on the decline as more office space went on the market.

Following a number of large property sales in 2017, investment had been muted in 2018, with a lack of properties available for purchase, JLL said. new, built