The first post-quake survey of Wellington office vacancies has found the most acute shortage of space in almost a decade.
The survey by Colliers International’s Research and Consultancy team has revealed only 7.8 per cent of office space in Wellington’s CBD was vacant last month, down from 10.5 per cent shortly before last year’s quake, and 11.9 per cent in June 2016.
It is the first time the vacancy rate has dipped below 10 per cent since December 2010, when the vacancy rate was 9.9 per cent.
Much of the shortage is due to seismic damage following the magnitude 7.8 earthquake, which struck near Kaikoura on November 14, 2016.
Colliers International CBD Office Leasing Specialist Steve Maitland says displaced businesses are still desperately looking for space, but options are very limited.
“Wellington is full,” he says. ”You could put up a sign saying, ‘the inn is closed’ – that’s how constrained the supply is.”
Maitland says the demand has come in two waves.
“Immediately after the quake, a number of large organisations suddenly lost a vast amount of office space. BNZ and Statistics New Zealand alone lost almost 28,000sq m – enough for more than 2000 staff.”
First movers were quick to secure new premises, which left others scrambling to find space.
“It was absolute bedlam,” Maitland says. “In over 20 years in the business, I’ve never experienced a period like that November through to Christmas. The phone never stopped ringing.”
Maitland says there is now a second wave of demand, after Wellington City Council last month ordered more seismic tests on 80 buildings.
“The market has gone into overdrive again, as tenants consider whether to move premises and start weighing up the alternatives.
“They’re all finding out very quickly that there aren’t many options out there – there’s a real lack of large floors and contiguous spaces.”
Maitland says the shortage is particularly acute for larger organisations of more than 70 people, which require 1000sq m or more of floor space.
The Colliers International survey found central Wellington had 108,300sq m of vacant office space last month, down from 154,536sq m shortly before the quake, and 175,472sq m in June 2016.
Since the quake, 97,125sq m of total office stock (7 per cent) has been removed, with seismic damage being the largest factor.
Maitland says demand for the remaining space would ease as new buildings became available within the next year.
A new 14-storey tower at 20 Customhouse Quay, anchored by tenants Deloitte and IAG, is due for completion in late 2017, while the new PWC Centre at 10 Customhouse Quay will be completed by mid-2018.
“When those projects are complete, office space will become available in the tenants’ old buildings. But the real issue is the here and now – it’s like a game of musical chairs.”
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