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Wellington businesses consider workplace strategy

Is now a good time to move premises?



Long term investment with development potential/new-zealand/en-gb/news/916/long-term-investment-with-development-potentialAUCKLANDLong term investment with development potential
Former Fire Station on high profile corner site/new-zealand/en-gb/news/915/former-fire-station-on-high-profile-corner-siteCHRISTCHURCHFormer Fire Station on high profile corner site

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Office vacancy rates in Wellington are high right now and set to increase, thanks largely to the government’s drive to reduce the space it occupies through WAP2 (the second phase of the Wellington Accommodation Project) and the new builds on the waterfront. 

Research by commercial property company JLL shows vacancy in the Wellington office market rose 1.4 percentage points to 7.7 percent in the first half of 2016, when compared to the second half of 2015. More than 30,000 sqm of office space sits vacant with demand centring on northern quarters of the city. The addition of both new and refurbished supply over the next two years will push up the vacancy rate which JLL expects to peak over 2018 and 2019 in the range of 12 to 13 percent.  

Businesses are thinking about their use of space and pondering whether now is a good time to move. 

Andrew Fullerton-Smith is the lead broker in the Wellington Capital Markets team at JLL. He says Wellington is very much a tenant’s market at the moment. 

“The overall business sentiment in Wellington is of growing confidence,” he says. “The market is somewhat unique. We have new A-grade space coming to market, while at the same time the government is significantly reducing its overall footprint. So we have increasing vacancy and a two-tiered market. Record rents are being set for A-grade new build space. Meanwhile, landlord incentives are reaching new highs as owners try and secure tenants before a real flood of vacancy becomes apparent.

“We’re talking to a lot of tenants who are reconsidering how they use their office space. The buzzword here is workplace strategy. We find that many tenants need help figuring out how to use the space they’re in more efficiently. 

“As part of their workplace strategy, companies need to go through a space procurement process to establish whether they are better to stay in their current premises or move elsewhere, weighing up the pros and cons of a relocation, the cost associated, market rates and overlay market inducements. Right now, landlords are offering very favourable terms and incentives, so it’s a good time to be looking around.

Fullerton-Smith says JLL has worked through a procurement process for many large and medium-sized tenants over the last 24 months. 

“The tenant might need more space because of organic growth or take advantage of a lease event to reposition their brand in the marketplace, creating a new and exciting working environment. We help these tenants to establish what efficiencies could be made by relocating and the costs associated in comparison with their current floorplate and space. 

“This can be achieved by taking the tenant’s requirements to market with a detailed space brief. Landlords come back to us with their best offer and we go through these with the tenant and take them to view the options they shortlist. 

“Even with the most efficient analysis, the process can take anywhere from six months to 18 months. So getting the timing right is crucial,” he says. 

“It’s important to go through a thorough process to establish if that’s the right choice. Every situation is different, and it will depend on what’s in your current lease agreement.

​“A good broker will make sure you’re aware of what’s in your contract and that you understand it. Sometimes your contract limits your ability to move, but a good broker will help you get your head around it. 

“Given the current market, chances are running a process like this will be beneficial to any company’s bottom line,” Fullerton-Smith says. 

Read the Dominion Post story here​