Hotel conversion tipped for offices

SEVERAL MAJOR office buildings in Auckland’s CBD could be switched to hotels, according to commercial real estate services company Colliers International.

Last week international hotel operator Accor Hotels announced it would open a boutique operation in the Reserve Bank office building on Customs St in downtown Auckland. That could be the start of a trend of converting office buildings to hotels, Colliers national director of hotels, Dean Humphries, said.

‘‘Given the strong demand for hotels in Auckland and the acute shortage of existing hotel stock for sale, more office conversions are a real possibility. We have a number of older, secondary-grade vacant or near vacant office buildings that would be ideal for conversion to hotels,’’ he said.

One of those would be the former BNZ tower behind the facade of the historic banking chambers at 125 Queen St.

The building is considered secondary office grade and had been mostly vacant for some time, but is in an excellent location.

That meant its owners would likely be looking for new uses for the building and it is understood that several developers have already considered converting the building to apartments.

Humphries said it was possible Auckland would follow a similar trend to one already evident in Brisbane, where two office-to-hotel conversions were under way.

The two cities had similar dynamics and were at similar stages of the property cycle, he said.

Colliers research manager Chris Dibble said there was strong demand for A-grade and premium office space in Auckland, with vacancy rates at the top end of the market almost halving over the past two years, to around 5.8 per cent.

The long-term average vacancy rate for premium and A-grade buildings in Auckland was 8.5 per cent. Many of the tenants taking space in those buildings were moving out of secondary grade buildings, often leaving behind vacant space.

The vacancy rate in secondary buildings is 11.8 per cent, Dibble said.

By contrast, the hotel sector was riding a high.

‘‘The New Zealand hotel sector is having a fantastic year, with guest