Adding value in Graham St
Awell-known Victoria Quarter office property will tempt purchasers with some of Auckland City’s best harbour views. Set on an elevated 4841sq m freehold site and fully occupied by Auckland Council, 35 Graham St is to be sold by expressions of interest, closing at 4pm, March 14.
The property is being marketed by CBRE agents Brent McGregor, Mark Maginness and John Holmes, who describe a unique grandstand position above Fanshawe St.
McGrego points to multiple nearby office developments for the likes of Spark and NZME in recent years. The regenerated precinct has attracted commercial tenants such as Fonterra, Datacom and Air New Zealand, proving its desirability for occupiers and investors, he says.
“And this property takes pride of place on the edge of Auckland’s original foreshore. It supports a fourstorey office building constructed in 1997, which incorporates the original foundations and a small area of supporting heritage structure and mosaic artwork of the BJ Ball building, previously on the site.
“Large rectangular floor plates (of up to 3439sq m), allow tenants to improve efficiencies and reduce costs. They could split floors to satisfy leasing demand. The building’s central core conveniently divides the floors into east and west wings, while atriums in each wing provide excellent natural light to all floors.”
With an A Grade seismic rating, the property is well positioned to attract corporate tenants and has a current rental value of $3,975,000 pa + GST.
It is 100 per cent occupied by Auckland Council and a leaseback agreement forms part of the sale and purchase agreement.
McGregor says the two-year lease provides investors or developers with the opportunity to plan for future repositioning or redevelopment while receiving strong holding income.
“Whether as a hotel, apartments or office building, the location, views and underlying land zoning presents multiple possibilities to add-value.
“The opportunities include refurbishing current office space to achieve greater rental growth, as well as the potential to add up-to a further
8588 sq m of GFA.
“With 12,515sq m of NLA, 2525sq m now used as storage, this space could potentially be converted to around 76 car parks.”
Development-wise, maximum total floor area ratio controls sit between 14,523sq m GFA and
19,364sq m, providing significant future potential.
The property will benefit from ongoing investment into infrastructure and commercial projects, including a new linear park along Victoria St and the $3.4b City Rail Link, the country’s largest ever infrastructure project.
The transport connection and added public amenity enhances the property’s value as office space, at a time when there is no shortage of demand.
Proximity to the new $700m New Zealand International Convention Centre, which is less than 1 km away, will also heighten its prospects as an attractive asset, says Holmes.
“With international visitor arrivals increasing by more than 840,000 over the past five years, at an annual average growth of 7.6 per cent, 35 Graham St also offers potential as a future hotel site, filling an obvious need in Auckland’s booming hotel market.
“All hotel segments are achieving record occupancy levels in excess of 80 per cent with an overall market average of 83.7 per cent in the 12 months to September 2018. All segments are achieving record Average Daily Rates, with a current market average ADR of $210, an increase of 2 per cent on the previous year.”
A growing owner-occupier market in Auckland CBD, plus a low level of residential apartment supply being brought to market, has reduced unsold stock, says Maginness.
“This means a good pre-sale takeup for apartments exists in the CBD, where at any one time around 80 per cent of the pipeline is pre-sold. With Auckland being one of the fastest growing cities in the Asia-Pacific region, we’re experiencing unprecedented demand for apartments and high quality office properties,” he adds.
“However, 35 Graham St is in a class of its own, due to security of income; generous size of both site and building and ability to add floor area to create a large-scale mixed-use development.”