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News Release

SEISMIC STRENGTH KEY TO TENANT CHOICE


 

 

Historic Auckland landmark the General Building for sale/new-zealand/en-gb/news/851/historic-auckland-landmark-the-general-building-for-saleAucklandHistoric Auckland landmark the General Building for sale
Significant piece of industrial land for sale /new-zealand/en-gb/news/848/significant-piece-of-industrial-land-for-saleChristchurchSignificant piece of industrial land for sale

Seismic issues in properties can no longer be avoided and increasingly, we are witnessing these becoming a key driver for tenants within the Wellington office market when considering their current or new office space. And sourcing sound property advice is now paramount when navigating through this process.

Tenants that are today looking at taking space in Wellington’s CBD are feeling the after effects of the Canterbury earthquakes. Whilst the landscape in Christchurch bore the brunt of the physical damage the impact on the leasing landscape for property is being felt much further afield.

 
Prior to the earthquakes, tenants throughout the country paid little attention to the earthquake rating of a building. Even in earthquake prone Wellington little regard was given to the seismic strength of a property. Today the seismic rating of a building is now a fundamental driver for tenants when considering their existing accommodation as well taking on new space.

 
 

Large corporates are recognising that issues relating to seismic rating are not just an issue for the property people in an organisation they are becoming a ‘health and safety in the workplace’ issue. If a company leased space in an earthquake prone building (i.e. less than 33% of the New Build Standard “NBS”) and was subsequently damaged in an earthquake then the company or even the Directors could be liable for any injury or deaths that may result.
 
This issue also impacts Human Resources in regards to attracting and retaining talent. Potential employees now consider the full consequences of working in offices that are rated well below the best in the market. This then becomes a priority in their decision making when choosing companies to work for.

Concerns such as this have now overtaken the focus on Green Buildings in regards to what tenants’ demand of their office buildings. As a result, the building quality matrix by default is being re-defined to include the seismic strength as a high priority amongst other aspects such as the quality of services, location and floor plate size.

For a building to retain its A-Grade status, tenants are now demanding that the seismic strength of the building must be at least A-Grade (close to 100% NBS standard).

 
 

Steve Rodgers, Director of Leasing for Jones Lang LaSalle says, “When we saw the market turn its attention to Green Buildings, take up varied from building to building as tenants weighed up how important environmental issues were to them and their staff.  When the GFC hit, it led to a waning in the focus towards a Green-Star rating.
 
“Today seismic issues in properties cannot be ignored and tenants are compelled to consider this in the quality mix of an asset when assessing their shortlist of accommodation options. This is only going to intensify moving forward as councils around the country push forward programs aimed at refurbishing and repairing non-compliant buildings.”

 
 

Rodgers continues, “A number of building owners are being forced to spend anywhere from tens of thousands of dollars up to multiple millions of dollars to strengthen existing buildings in order to just preserve what they had before the recent focus on seismic ratings. There are a number of pro-active landlords who are getting on the front foot and just getting on with the work.  This is having a positive effect on tenant retention, particularly where the works have little impact on the tenanted areas. This results in the best case scenario for the landlord in retaining their tenants, and, following a costly upgrade, they’re ultimately not losing significant value in their asset.”


One of the main challenges facing landlords is the accessibility of quality advice when it comes to having their buildings seismic rating assessed as the majority of structural engineers are now so busy in keeping up with demand.  By default, most landlords only have IEP (Initial Evaluation Process) rating to give tenants, although the danger of this is that they are only a desktop assessment and can vary wildly from the actual seismic rating of the building once more detailed modelling is carried out.
 

 “We are seeing some huge fluctuations in both directions from the IEP rating to the final rating that the building achieves. In one instance, the IEP rating was only 25% NBS but then following detailed analysis, the final result was 85% NBS. Likewise another building owner who went straight for a detailed analysis and received a rating around 40% NBS for their asset and prudently took action with a costly upgrade plan.  They subsequently had an IEP assessment done which gave the building a 100% NBS rating.” says Rodgers

Rodgers concludes, “Tenants and owners alike need to make sure that they have sound property advice and information on which to base their decisions on as the cost of getting it wrong can be excessive.”