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WELLINGTON

Wellington office market will remain tight in 2017

Earthquake puts hold on oversupply situation for now


 

 

East Tamaki gem with new five-year lease/new-zealand/en-gb/news/863/east-tamaki-gem-with-new-five-year-leaseAucklandEast Tamaki gem with new five-year lease
Rare vacant land in Grey Lynn for sale/new-zealand/en-gb/news/861/rare-vacant-land-in-grey-lynn-for-saleAucklandRare vacant land in Grey Lynn for sale

Wellington_JLL.jpgJLL has released commentary on the Wellington office market, in the aftermath of the Kaikoura earthquake which affected a number of Wellington buildings in November. 

JLL’s Wellington-based Research Consultant Chris McCashin says the office vacancy situation is starting to become clearer. 

“After the earthquake, 80 buildings were put on the earthquake register by Wellington City Council and require further invasive testing. Owners have until February 10 to complete the work,” he says. 

“Vacancy has now tightened from 7.7 percent in June 2016 to 4.9 percent in December 2016. We now have very little vacancy in terms of spaces over 500sqm that are above 67 percent NBS in Wellington, which makes tenant movements much more difficult.”

JLL Wellington Broker Andrew Fullerton-Smith says landlords are now offering fewer incentives given the short-term lack of space, but rental levels are generally steady. 

“The majority of leases signed post-quake have been short term, i.e. no more than 12 or 24 months. Many tenants will have leases expiring in the fourth quarter of 2017 or during 2018. We also expect new builds to come on-stream in 2018 along with remediated stock re-entering the market. This means that while the market will be tight for the next year or so, we have an over-supply situation on the horizon.”

JLL’s National Research Manager Tom Barclay points out that this oversupply situation was predicted for Wellington.

“Essentially that oversupply situation we were forecasting has been delayed by 12 to 18 months because of the effect of the earthquakes,” he says. “In the short term this has been favourable for a number of landlords who had vacant space sitting on the market or becoming available in 2017.

​“Both occupiers and purchasers now have longer due diligence periods for Wellington office buildings. It is very much a reactive market. Investors are naturally cautious at the moment, but overall Wellingtonians are optimistic about the city’s economy in 2017,” Barclay says. “The latest NZIER Quarterly Survey of Business Opinion shows business confidence remained high in Wellington at the end of 2016, despite the earthquakes.” ​