Competition has returned to the Wellington office leasing market, with businesses jostling for space in good-quality, well-located A and B grade buildings with larger floor plates, says Steve Maitland of Colliers International.
Colliers International has recently concluded two lease deals in Optimation House at 1 Grey Street – a quality B grade building – and Maitland says the available space was in hot demand.
“Both floors we offered were leased well in advance of their availability, and there was competition for the floors between prospective tenants,” he says.
“This competition factor has been absent from the Wellington leasing market for the past two years or so, but is now back. In addition, the trend for businesses to upgrade to better office space shows no sign of abating.”
Maitland adds that while many tenants are moving to higher-quality office space in order to enjoy facilities which they did not previously have, others are downsizing their office space to reduce costs.
“At a time when the Wellington leasing market is sluggish, well-positioned, good-quality buildings are still being taken up and obtaining quality tenants.”
The two Optimation House leases were to law firm Gibson Sheat and the Financial Markets Authority. The substantially-refurbished building, owned by DNZ Property Fund Limited, also houses Maritime New Zealand, Westpac, Arabica café and Real Aotearoa. The 12-storey building offers typical floors of 800sq m, with the lower two floors of 1100sq m each offering even greater efficiency.
“The building offers cost-effective office space in the heart of Wellington’s CBD with great views and natural light,” says Maitland.
He says level nine, which was leased to Gibson Sheat, was subject to competition from several parties, even though it will not become available until mid-2012.
“Gibson Sheat’s Wellington City staff are split over two levels in their current premises and are looking to make efficiency gains by shifting to a larger single floor,” says Maitland.
The space is becoming available as a result of the Ministry of Foreign Affairs and Trade downsizing and relocating to its head office in the HSBC building.
The Financial Markets Authority will be relocating from Unisys House at 56 The Terrace to level two of Optimation House, again replacing a two-floor arrangement with a bigger single floor.
“Level two will be completely upgraded, making it the last floor in the building to be fully refurbished. All partitions will be stripped out and the space will gain new carpet, paint, a new ceiling grid, new energy efficient lighting and re-decorated bathrooms in time for the FMA to move in in mid-2012,” says Maitland.
Office vacancy in Wellington CBD is around 4% in A grade; 8% in B grade and 15% in C and D grades. Over the next 12 months, overall office vacancy is expected to rise, with an increase in secondary vacancy being the main driver. The relocation of Telecom to its new building on Willis St will see more than 20,000sq m of secondary office space becoming vacant. However, prime vacancy is expected to remain largely unchanged.
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