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Christchurch

Christchurch remains positive as change is inevitable

Research from Christchurch


 

 

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Research from Jones Lang LaSalle has found that the Christchurch office market sentiment in the area remains upbeat; however, landlords, occupiers and investors will remain cautious until the ramifications of the earthquake are fully accounted for.

 
Now that seismic activity has settled, overall demand has increased across Christchurch.
Investor appetite has risen within the office market as insurance monies are beginning to be paid or agreed for the purchase of a replacement property.
 
Justin Kean, Director of Research at Jones Lang LaSalle, says, “There has been a clear shift from high rise inner city to low-rise seismic proof space. Subsequently, growth in the development of suburban office has responded and will continue to be an ongoing trend.  Levels of vacancy in this area are now also very low which has helped drive the development pipeline.”
 
Yield profiles in the Christchurch office market have firmed 100 basis points over the last 12 months which has had a positive impact, with capital values rising 13% over 2012. This is likely to remain a trend over 2013 as business sentiment improves.
 
The rebuild of Christchurch’s CBD has yet to begin as the “red zone’ is still in place and demolitions will continue for an estimated further six months. Building activity has heightened over the second half of 2012, indicated by several new developments in the office parks surrounding the central business district. Although this is positive for the city, some uncertainty remains around whether occupier demand will return for the CBD office market.  It is therefore difficult to forecast the supply scenario due to the wide range of demand variables that exist.
 
With regards to the retail landscape, the total supply of retail space in and around the city was heavily impacted by the September earthquakes. As a result, the CBD has endured a major shift and the retail outlay has changed dramatically with the retail focus moving to the suburbs and the completion of a number of bulk retail developments. This ultimately placed pressure on the supply of existing suburban retail space and a corresponding increase in rentals occurred.
 
The limited supply situation and rising occupier demand within the city has caused rental growth over the last 12 months by approximately 30%. This has translated into an increase in retail asset capital values of 32% over the second half of 2012.
 
Keen continues; “Looking ahead, many are cautious about building strength and the large uncertainty surrounding the future outlay of the city. Construction is likely to accelerate over 2013, particularly in areas where high demand for office space exists. Primary rental levels are likely to experience upward pressure as demand out strips supply. Although the process of rebuilding is likely a 10 year project, confidence that Christchurch will evolve into a better place to live, work and play is growing.