Colliers Portfolio | Issue 3 2022

Colliers Portfolio Issue 3

Six high-profile Auckland childcare investments with charitable trust tenant More on page 04

Accelerating success.

June/July

2022

Recent Deals SOLD

SOLD

SOLD

2 Colliers Portfolio

153 Durham Street, Tauranga Central Sold by Richard Davidson and Simon Clark

SOLD

397 Great North Road, Henderson Sold by Gawan Bakshi, Amir Bashota, and Rijak Bakshi

SOLD

202 - 206 Ellison Road, Hastings Sold by Jack Elliott and Danny Blair

27 Nugent Street, Grafton Sold by Jonathan Lynch and David Burley

SOLD

145 Durham Street, Tauranga Central Sold by Richard Davidson and Simon Clark

SOLD

200 Napier Road, Hilltop Sold by Daniel Moffitt and Hugh Milloy

41 Waikato Street, Taupō Sold by Hugh Milloy

SOLD

91 - 93 Princes Street, Hawera Sold by Benet Carroll

SOLD

2A/6 Viaduct Harbour Avenue, Auckland Sold by Adam White and Matt Plowman

Contents Colliers Portfolio Issue 3 04

Six Top Quality Auckland Investments Front cover feature

06

Six high-profile Auckland childcare investments

08

10

12

13

16

18

Hazeldean Business Park

Prime Christchurch office park up for grabs

Meet our expert

Mark Synnott

Key Listings

New Zealand Research Report June 2022

It’s an interesting time in the market with interest rates and inflation being regular topics of discussion and important factors for commercial property investors to consider. While there is a lot of speculation, high-quality property remains a sought-after commodity and we are experiencing solid levels of buyer enquiry. The market remains very active with transactions happening across all asset classes and locations.

Our latest Portfolio showcases a range of premium investments, including a portfolio of childcare centres in Auckland – one of New Zealand’s most sought-after asset classes with its appealing tenant covenant. We also have industrial, retail, and office assets across the country, including a large landholding in the Port of Tauranga’s industrial area, Christchurch’s high-profile Hazeldean Business Park, and the Fletchers Huntly property.

Thank you for your interest in Colliers Portfolio, our national sales team has a range of options and looks forward to hearing from you.

Gareth Fraser Auckland Director | Investment Sales

Colliers Portfolio

3

Premium Listings

1 Picturesque Drive

293 Botany Road

15 Siedeburg Drive

99 Michael Jones Drive

Six Top Quality Auckland Investments Annual returns between $169,000 $300,300 pa net + GST

12 year lease + ROR's.

Final Expiry in 2052

Six childcare properties buy one or buy all

Annual rental growth + market reviews

National tenant BestStart Educare Ltd

Six high-profile Auckland childcare investments with charitable trust tenant For sale by Deadline Private Treaty closing at 4pm Tuesday 12 July 2022 (unless sold prior) On behalf of BestStart Educare Ltd, Colliers are proud to exclusively offer to the market six quality childcare investments in prominent, high growth Auckland locations with fantastic investment highlights. The properties can be purchased either individually or as a combined offering, opening up the opportunity to all levels of investors.

employees and support staff. This year BestStart won the Reader's Digest Most Trusted Brand award in its category for the third year in a row.

uality Auckland Investments

Total net rental income from the combined portfolio

The portfolio represents quality and high-profile locations with strong land values that underpin the future value of these assets.

line Private Treaty closing at 4pm Tuesday 12 July 2022 is $1,574,324 pa + GST with each individual centre r) producing between $169,000 to $300,300 pa +

GST. All properties have initial 12-year lease terms plus further ROR's with final lease expiry in 2052.

The terms also offer fixed 2% annual rental growth Six childcare National – 12 year leasein+ Annual rental plus 4 yearly markettenant reviews.

The ECE sector properties – buy BestStart Educare ROR’s. Final Expiry growth + market NZallis heavily government backed and in assets one or buy Ltd 2052 are reviews becoming highly sought after given their attractive, ducare Ltd, Colliers are proud to exclusively offer to the market six quality childcare long term investment fundamentals.

nt, high growth Auckland locations with fantastic investment highlights. The properties can ividually or as a combined offering, opening up the opportunity to all levels of investors.

from the combined portfolio is $1,525,500 pa + GST with each individual centre producing 00,300 pa + GST. All properties have initial 12-year lease terms plus further ROR’s with final e terms also offer fixed 2% annual rental growth plus 4 yearly market reviews. The ECE overnment backed and assets are becoming highly sought after given their attractive, long mentals.

Shoneet Chand 021 400 765 Ronal Prasad 021 232 1192 Matt Prentice 021 464 904

ago by Wayne & Chloe Wright, BestStart is a registered charity and is New Zealand’s largest ation and care with over 15,000 children attending one of its 270+ centres daily, and a team oyees and support staff. This year BestStart won the Reader’s Digest Most Trust Brand the third year in a row.

Scan the QR Code to find out more

quality and high-profile locations with strong land values that underpin the future value of

Ronal Prasad Matt Prentice 021Founded 232 1192 464 904& Chloe over 25 years 021 ago by Wayne

Wright, BestStart is a registered charity and is New NZL67019478

Zealand's largest provider of quality education and care with over 15,000 children attending one of its 270+ centres daily, and a team of 4,500 dedicated

colliers.co.nz/p-nzl67019478

Colliers Portfolio

5

LY

Featured News

Six high-profile Auckland childcare investments with charitable trust tenant A portfolio of childcare centre properties accommodating over 550 children spread across high growth locations in Auckland offers buyers the opportunity to secure premier properties with longterm tenants in one of New Zealand’s most soughtafter asset classes.

The portfolio includes the land and buildings for six BestStart Educare centres, which is part of the company’s nationwide network of more than 270 early childhood education centres that care for more than 15,000 children each day. BestStart Educare Limited is a registered charity.

The total net annual rental income from this sixstrong portfolio is $1.57 million plus GST with each individual centre returning between $169,000 to $300,300 plus GST per annum. In addition to new 12-year lease terms plus further rights of renewal and a final lease expiry of 2052, this portfolio of centres also offers fixed annual rental growth plus four-yearly market reviews.

The properties can be purchased separately or as a combined offering, opening up the opportunity to a wide range of buyers who will recognise the significant potential attached to a passive investment of this kind.

Colliers Brokers Shoneet Chand, Matt Prentice and Ronal Prasad have been exclusively appointed to market all six of the properties for sale by Deadline Private Treaty closing at 4pm on Tuesday 12 July, unless sold prior.

Two of the centres are in Flat Bush with a 509 sq m building licensed for 100 children on a 1,943 sq m site at 1 Picturesque Drive/25 Murphy’s Park Drive, and a 355 sq m property designed to accommodate 52 children on a 1,012 sq m site at 99 Michael Jones Drive, which is zoned Residential – Terrace Housing and Apartment Buildings Zone under the Auckland Unitary Plan.

Both modern facilities are on high-profile, freehold sections and were constructed during the past three years and offer on-site car parking.

Located at 293 Botany Road in Botany Downs is a 603sq m centre that is licensed for 104 children on a 2,600sq m freehold site. Surrounded by residential and commercial developments, the property is zoned Business – Mixed Use Zone offering strategic future development potential with a height limit of 18m.

The purpose-built childcare centre located at 17-19 Portage Road, Ōtāhuhu was opened in 2015 and is designed to accommodate 90 children. The 640 sq m property sits on a 2,337 sq m freehold site. Portage Road serves as a throughfare providing fantastic traffic exposure in a growing residential neighbourhood.

The final property in the portfolio offers 441sq m of floor area on a 1,923sq m freehold site located at 1-3 Cellarmans Street in Te Atatū Peninsula.

The property, which is zoned Residential – Terrace Housing and Apartment Buildings Zone, can accommodate 100 children and has favourable proximity to the nearby motorway network and fantastic on-site car parking.

Chand, Director of Investment Sales at Colliers, says this is an exceptional purchasing opportunity underpinned by the strong land values of the available sites.

“These properties are all located in key growth locations of Auckland meaning there will be continued demand for their usage for many years to come,” Chand says.

“There’s an incredibly strong tenant covenant on offer through the long-term leases on favourable

Prentice, Director of Sales and Leasing at Colliers, says the childcare industry is an asset class with tremendous investment fundamentals, including strong Government funding for the sector.

“All of the BestStart centres use the New Zealand curriculum Te Whāriki, preparing children for their formal education at school. The trained teachers support children to belong, thrive, and achieve through the world-recognised philosophy of learning through play,” Prentice says.

“Founded in 1996 by Wayne and Chloe Wright with their first centre in Tauranga, BestStart has flourished and grown into New Zealand’s largest provider of early childhood education as a New Zealand-owned charity providing preschool, kindergarten, Montessori, and home-based services.

“BestStart’s mission is to provide high-quality education for young children with a focus on professional development of staff and providing a specialist support network. Their teachers are passionate and committed. They take pride in providing exceptional professional development opportunities that ensure their staff have outstanding skills.”

Prasad, Investment Sales Broker at Colliers, says it is incredibly rare to see opportunities of this nature presented to the open market.

“This portfolio provides prospective purchasers with the opportunity to acquire a collection of strategic assets that will provide significant long-term upside,” Prasad says.

“We encourage all interested parties to contact us promptly to ensure they do not miss out on this unique portfolio.”

Shoneet Chand 021 400 765 Ronal Prasad 021 232 1192 Matt Prentice 021 464 904

7

The large site occupies a fantastic position benefiting from easy access via arterial route Te Irirangi Drive and is zoned Residential – Mixed Housing Urban Zone.

terms that will provide incremental rental income growth for buyers.”

Colliers Portfolio

The next site is located at 15 Siedeberg Drive in Dannemora and the purpose-built facility provides 790sq m of floor area on a 2,928sq m site that can accommodate 105 children.

Boundary lines are indicative only

CALDER STEWART PRE-CAST TOLL

8 CALDER STEWART CONSTRUCTION

ALLIED PICKFORDS

Colliers Portfolio

A-Grade Investment - Long Term Lease 20 Sir James Wattie Drive, Hornby, Christchurch Deadline Private Treaty closing 4pm, Wednesday 13 July 2022 (unless sold prior).

L

New 6 Year Lease

Household Name Occupiers

Modern Industrial Buildings

3.9481 ha Land Area

32% Site Coverage

Annual Rental $1,980,387 + OPEX + GST

There are very few true ‘Prime A-Grade’ industrial properties to come available in the New Zealand market however here is one such asset.

Fundamentals such as modern, conventional buildings with stud heights and floor loadings which cater to the widest possible industrial occupier market, low office to warehouse ratios, large yard areas, low site coverage with the ability to further develop, strong occupier covenants, market protected rent review structures and of course, the most sought after of locations are all attributes that knowledgeable investors seek but rarely find.

This campus style industrial investment, with three modern buildings, household name occupiers, a new six year head-lease and future potential to develop further, is for sale by Deadline Private Treaty.

This prime investment will be in strong demand so early buyer engagement is encouraged.

Sam Staite 021 738 245

Hamish Doig 021 320 149

colliers.co.nz/p-NZL67019439

9 Colliers Portfolio

BOUNDARY LINES INDICATIVE ONLY

For Sale Double Site on Wairau Rd – Buy One or Both!

99 & 101 Wairau Road, Wairau Valley, Auckland For sale by Deadline Private Treaty closing at 4pm Tuesday 19 July 2022 (unless sold prior)

Z Total Net Income $456,309 pa

Combined Land 2 Area – 3,599 sqm 3,599m

Demolition clauses in all leases

Invest, Develop or Occupy!

Excellent Zoning 20m Height Limit

Perfectly positioned in the heart of Wairau Road with extensive exposure to the Northern Motorway and dual site access is one of the most exciting offerings to come to market in recent times.

3,599sq mand andtotal totalnet netincome incomeof $456,309 papa + GST && Featuring two freehold titles with combined land area of 3,599sqm $456,309 + GST OPEX, this exceptional offering provides ultimate flexibility with demolition clauses in all leases, making it suitable for occupiers, developers or investors.

The opportunity exists to acquire either 99 Wairau Road or 101 Wairau Road independently, or as a combined offering for both.

99 Wairau Road features total land area of 1,831sqm, 1,831sq m,building buildingarea areaof of1,111sqm, 1,111sq m,1919car carparks parksand andtotal totalnet net income from three tenants of $175,419 pa. 101 Wairau Road features total land area of 1,768sqm, 1,768sq m,building buildingarea areaof of 1,000sqm, 1,000sq m, 36 car parks and total net income from four tenants of $280,290 pa.

Shoneet Chand 021 400 765

Matt Prentice 021 464 904

colliers.co.nz/p-NZL67019494

10

Colliers Portfolio

11 Colliers Portfolio

Prime Christchurch office park up for grabs Hazeldean Business Park Details on page 14

Featured News

Prime Christchurch office park up for grabs Premier Christchurch office precinct Hazeldean Business Park, which is located on the city fringe in Lincoln Road, is being presented to the market for sale.

Developed by Calder Stewart, the park comprises six individual buildings, including a multi-storey car park, providing 493 spaces, plus an additional 100 car parks outside the respective buildings.

Marketed by Hamish Doig, Mark Macauley, and Marius Ogg of Colliers, the property is being offered for sale by deadline private treaty closing 30 June.

“To the astute investor, this is an opportunity to secure quality buildings in a strong location, underpinned by a substantial landholding,” Macauley says.

“It’s a great position, benefiting from multiple street frontages and easy access to surrounding transport links and the central city.

“There’s sound income across multiple buildings and 19 individual tenancies with strong occupancy.”

Situated to the south-eastern side of Lincoln Road, just south of its intersection with city ring road Moorhouse Avenue, the park has a net lettable area

of 15,027sq m and covers 1.6086ha of land. Net annual rental income is $2.21 million.

Hazeldean Business Park forms part of the thriving Addington business and hospitality district and is only 2.5km from the CBD. Additional amenity is provided by nearby Hagley Park, and the Parakiore Recreation and Sport Centre, which is currently under construction.

Doig says that following a period of market upheaval and change following the earthquakes, the Christchurch office market is more settled and mature.

“After years of oversupply that pushed rental rates down, vacant space in the CBD has been largely absorbed and we’re now facing a shortage of available stock. In turn, we’re seeing falling vacancy rates in the suburban market and space close to the fringe is keenly sought.

“The suburban market has experienced a good take up of available space.”

Doig says there is still a large differential between CBD and suburban rental rates for quality stock, an appealing variable for those tenants who don’t want a CBD address.

Boundary lines are indicative only

Stunning Investment Opportunity with Scale

Combined land holding of 1.6086 hectares

Hamish Doig 021 320 149

Various titles enabling individual sale

Mark Macauley 021 650 460

89.21% occupied (excluding building 6.)

Substantial supporting carparks

Marius Ogg 021 905 940

Colliers Portfolio

13

Hazeldean Business Park, Addington, Christchurch Deadline Private Treaty closing 4pm,Thursday 30 June 2022 (unless sold prior).

colliers.co.nz/p-nzl67019301

Industrial Investment Opportunity

7,413m² freehold site

Current gross rent $463,667 + GST

All leases expire 2025

Drive through access

Simon Clark Rob Schoeser 021 959 710 021 490 425 colliers.co.nz/p-nzl670193988

Wide road frontage

Prime Mount location

Colliers Portfolio

12 Mark Road, Mount Maunganui sold prior) For Sale by Deadline Private Treaty closing Thursday 14th 7th July July2022, 2022,4pm 4pm(unless (unless sold prior)

1

Strategic Mount Landholding

C

021 959 710 021 490 425 colliers.co.nz/p-nzl670193988

Large Tauranga Development Site A+ Development Opportunity 14

260 Welcome Bay Road, Welcome Bay For Sale by Deadline Private Treaty closing Thursday 14th July 2022, 4pm (unless sold prior)

Colliers Portfolio

Land area: 8,106m² (approx.)

170m of road frontage

Multiple development angles

Simon Clark 027 959 710

Substantial elevated site

Commerical zone

Adjoining Welcome Bay shops

Rich Davidson 027 860 9338

colliers.co.nz/p-nzl67019362

Premium Investment With New 12 Year Lease

Stand Alone CBD Investment

10-12 Hobson St, Dunedin

56 York Place, Dunedin

For Sale By Deadline Private Treaty closing 4pm Thursday 7 July 2022 (unless sold prior)

Rental of $174,000pa plus GST

Built in rental growth

Established childcare operator

For Sale By Deadline Private Treaty closing 4pm Wednesday 13 July 2022 (unless sold prior)

Rental of $97,788pa plus GST (approx.)

Multi-Tenanted

Excellent On Site Parking

Dean Collins 027 499 0974

Dean Collins 027 499 0974

colliers.co.nz/p-nzl67019122

colliers.co.nz/p-nzl67019339

New Lease to Fletchers F etm heoe FrFeree hh oo ldldInIn ve setsm nln tdtInvestment New Lease to Fletchers vre Freehold Investment 498 Great South Road, Huntly Fre ehold I120 nAve, vAve, eFitzherbert sPalmerston tPalmerston ment Ave, Palmerston North 120 North 120Fitzherbert Fitzherbert North 498 Great South Road, Huntly

colliers.co.nz/p-nzl67019488 colliers.co.nz/p-nzl67019488

Boundary lines indicative only

East Tāmaki Gold!

Invest in Newmarket 435 Khyber Pass Road, Newmarket Deadline Private Treaty, closing 4pm Wednesday 13th July (unless sold prior)

4 Nandina Avenue, East Tāmaki

For Sale by Auction to be held 11am Wed 29 June 2022 (unless sold prior)

NBS 3,790m² of prime office asset

Corner of Khyber Pass Rd & Crowhurst St

83% NBS (A-Grade)

David Burley 021 478 225 Blair Peterken 021 421 426

colliers.co.nz/p-nzl67019458

2,061m² freehold site

Greg Watson 021 083 13534

1,141m² net lettable area

Returning $165,000 net p.a. + GST

Paul Higgins 021 549 226

colliers.co.nz/p-NZL67019446

Colliers Portfolio

6913m² Returning New seven Net Income unit motel 30 year lease Net Income year lease 26 unit motel 26 unit motel Net Income 3030 year lease 26 2 6,913m 6913m² Returning New seven freehold $155,000pa year lease to plus car park $289,000 pa car park from 31/1/12 $289,000 papa from 31/1/12 plus car park $289,000 from 31/1/12 plus 26 unit motel Net Income freehold $155,000pa 30 year lease year lease to site + GST Fletchers 26 unit motel Net Income 30 year lease plus car park $289,000 pa site + GST Grant Lloyd from 31/1/12 Fletchers Grant Lloyd Grant Lloyd plus car park $289,000 pa from 31/1/12 021 433 144 021 433 144 021 433 144 Grant Lloyd Doug Russell Phil Nevill Grant Lloyd Doug Russell Doug Russell Alan Pracy Greg Goldfinch Ash Vincent 021 433 144 Alan Pracy 021 433 144 Greg537 Goldfinch Ash Vincent 027 222 8088 027 222 8088 027 222 8088 021 396 092 021 623 089 021 682 021 442 201 Doug Russell 021 623 089 021 537 682 021 442 201 Doug Russell 027 222 8088 colliers.co.nz/p-nzl67019251 027 222 8088 colliers.co.nz/p-nzl67019488colliers.co.nz/p-nzl67019251 colliers.co.nz/p-nzl67019488 colliers.co.nz/p-nzl67019488

15

For Sale by Deadline Private Treaty closing

For Sale

by Deadline closing 7 JulyFor 2022 For Sale bybyDeadline closing 7 7July 2022 Sale

by Deadline Privatesold Treaty closing For Sale Deadline closing July 2022 Mon 11 July at 3pm (unless prior) 120 Fitzherbert Ave, Palmerston North 120 Fitzherbert Ave, Palmerston North Mon 11 July at 3pm (unless sold prior) 2022 at 3pm (unless sold prior) For Sale by Deadline closing 7 July 2022 For Sale by Deadline closing 7 July 2022

Meet our expert Mark Synnott Mark Synnott has worked for Colliers since 1989 and has been the New Zealand CEO for more than 28 years. After completing a Bachelor of Commerce at the University of Otago he took on a graduate position with IBM in sales, marketing, and account management before eventually working his way to a head office role in Wellington.

However, a long-standing interest in property beckoned Synnott into commercial real estate where he has played an integral role in the industry and growing Colliers throughout New Zealand.

and strategic planning skills from my training at IBM. All of these factors made it a lot easier to work in the new recessionary environment, learn the intricacies of the market, and standout from others.

How did you get into the property industry?

After a couple of years with Realty Brokers, I moved to Colliers in 1989 to build and run a leasing team for them as the Office Leasing Manager. Paul Dyson, who is still with Colliers, and myself were the first two recruits for the relaunch of the Colliers brand in New Zealand.

In 1987 I decided to go into commercial real estate with Realty Brokers in office leasing. I started in a commissiononly role in October 1987, two weeks before the share market crash that eventually wiped out almost 60 per cent from New Zealand share prices – it was a real baptism of fire.

On reflection, it was probably one of the most challenging, but one of the best possible ways to start.

I was new, I hadn’t picked up bad working habits from the boom market, held no real preconceived ideas about commercial real estate and had a solid base of sales

At the beginning of my career, I basically started ‘fishing my feet’. I went and visited my IBM clients and eventually ended up doing some commercial real estate business with them. That gave me a bit of a track record and momentum.

I’ve found over the years that connecting with, looking after, and providing solutions for the people you know and can trust is a good tactic for doing great business.

What drives and motivates you to achieve professional success?

My internal motivation is based off my love of meeting new people and finding solutions to problems, but it’s

I also think that commercial property provides plenty of ways to get motivated into overcoming obstacles. For example, if you’re an agent in commercial property there is no ceiling to what you can earn, you’re only limited by how good you are at solving problems and how hard you are prepared to work.

Working in real estate has also enabled me to travel and do business with people throughout New Zealand, professionally and personally. I enjoy meeting good people who have got their feet firmly on the ground.

I lived in the South Island as a child and in my early adult life, in places such as Invercargill and Manapouri, and I went to university in Dunedin. So, I have always had a strong connection with the south. The Colliers Christchurch office was one of our first franchise offices, and it has been a really enjoyable partnership over the past 30 years.

And, if we didn’t have a perpetual focus on growth as a business, then I think my passion and enthusiasm would probably wane. It has been fantastic to grow the depth and breadth of Colliers’ services and our geographic coverage over the years, venturing into new markets, meeting new people, and collaborating to get great results.

What’s the most fulfilling aspect of your role?

It’s not only growth in a business, but growth in an individual which is probably one of the most fulfilling aspects. Identifying someone young, I’m talking about someone in their 20s who is in the beginning of their career but not working in the commercial property sector, getting a good feel for them as a person, and asking them a few questions and saying I think that person could be great in property.

It’s about employing and empowering young people, investing in them and seeing them develop into really successful people. The spinoff is that when they enjoy what they’re doing and they’re doing well, they recommend Colliers to other young people.

Our brand is our people and if you continue to attract and recruit the right people, especially from an early age, then they will do what’s right for Colliers, their colleagues, and their clients.

What do you think sets Colliers apart from other businesses?

The early years were a constant battle for survival in New Zealand. It was absolute carnage when Colliers opened its doors less than two years after the share market crash. But our resilience and tenacity kept us going. We won a few key appointments, got a solid team of people

I think our ability to adapt and innovate is unrivalled and we have always had the mentality to think differently to overcome challenges. From our early years when we hired ambitious young professionals rather than only established industry participants, through to finding new business lines to expand our operations, we have maintained a growth mindset.

What is a recent proud moment that stands out?

I am incredibly proud of the outcome of our bold and progressive new headquarters at Level 23 and 24 at the HSBC Tower in Auckland’s CBD. We moved here in 2021 after 30 years at our previous office at 151 Queen Street. Our five-year business planning session in 2015 identified that we needed to have an exceptional fit-out that gave our staff a real edge. What we didn’t expect was the disruption that Covid-19 would provide to workplace operations in 2020 and subsequently just how integral our new headquarters would become. Our extremely high expectations were completely exceeded, and it was fantastic to receive recognition of this with a Gold at the Designers Institute of New Zealand Best Design Awards recently. Our Project Leaders team worked closely with Warren and Mahoney to deliver the industry-leading, dynamic work environment that will continue to help accelerate the success of our people for many years to come.

What is your advice to people starting out in the industry?

Implant in your brain these two words: ‘building relationships’. Practice with colleagues first and then focus on building relationships with clients for the long haul.

It is incredibly important when starting out in the industry to try and develop relationships that are based on hard work, commitment, and trust. Never, ever break that trust. Once you’ve developed and nurtured it, it’s easy to maintain but if you break it, you’ll never get it back. If you can do that, then your reputation precedes you, repeat business will come, and your network will grow based on solid fundamentals.

Also, get a mentor, someone who’s not your manager, someone who’s in another division that’s doing something slightly different from what you’re doing that can show you the ropes. Advice and guidance on how to get the right results and be successful can really make the difference.

17

I’ve played a lot of sports in my life and to me commercial real estate is similar in many respects, often being a ‘full contact sport’, with the highs and lows, wins and losses, and how you build from these moments to achieve success.

together, and just kept building and growing. More than 30 years on from some real humble beginnings, we now employ more than 600 team members in 28 offices across more than 20 service lines.

Colliers Portfolio

potentially my natural competitiveness that stands out the most.

New Zealand Research Report June 2022

Should office development activity still forge ahead?

New build office development activity is ramping up in Auckland, Wellington and Christchurch, but is now the best time to proceed?

18

Development plans are being readied and cranes are popping up on the skylines of our major cities to build new premier office space. This is despite some reservations circling about the future of office arising from Covid-19 ’s acceleration of remote working and the potential influence on the demand for office space over the long term.

Colliers Portfolio

However, a review of market conditions in Auckland, Wellington and Christchurch highlight that while some changes to future demand levels may be likely, there are key reasons why pushing ahead with new development activity stacks up.

Not all office space is the same Whilst there is no doubt that flexible working practices are here to stay, businesses have identified the crucial role that the office plays in promoting collaboration, innovation, creativity and productivity and it strongly supports the building of company culture.

However, all of these outcomes are not achievable in all types of office accommodation. These features typically work best when the office space provides a high quality working environment, is structurally safe, and is attractive to employees, for more than just the workspace it provides.

In the current market conditions, ‘earning the commute’ of employees is at the forefront of consideration, along with flexibility, health and wellbeing, environmental sustainability, and seismic resilience.

Seemingly, obsolescence in existing office space has accelerated, alongside the demand for a quality in office space of which is increasingly in limited supply. And this is not just anecdotal, it is apparent in our latest research data.

In Auckland’s CBD, the prime grade (A grade and Premium Grade) vacancy rate sits at 7.3% approximately half of that seen within the secondary sector (14.1%) and this is down from previous cyclical highs The variation is also clear within the Auckland metropolitan market where A grade vacancy is currently 5.3% versus 8.8% within B grade or lower graded buildings In Wellington, the variation is greater still with the prime grade vacancy rate at just 1.1% while 7.8% of the secondary stock is vacant In Christchurch, where much of the CBD office stock has been rebuilt, the vacancy rate (including sublease space) has reached a two decade low of 9.7% and well down from 14.7% recorded in 2020. In the Core and West End precincts, which comprises approximately 60% of total stock, the vacancy rate has declined to 8.6% and 7.1% respectively.

Vacancy Rates Auckland CBD

Wellington CBD

Prime

Secondary

Overall

Dec-20

6.8%

10.6%

8.8%

Dec-21

7.3%

14.1%

10.9%

Christchurch CBD

Prime

Secondary

Overall

Dec-20

1.0%

8.7%

6.9%

Dec-21

1.1%

7.8%

6.3%

Core

West End

Overall

May-20

15.3%

7.4

14.9%

May-22

8.6%

7.1%

9.7%

Source: Colliers Research

Wellington's development requirement As vacancy figures illustrate, pressure on prime grade office space in the capital is particularly intense. This reflects the fact that, by comparison with other major Australasian centres, the proportion of office stock classified as prime space is low. The development pipeline has been limited while the shortage of space has been exacerbated by the removal of stock due to earthquake damage and other seismic concerns.

Wellington has approximately 1.4 million sq m of office space. Of this total, just 22% is classified as prime grade office space. By comparison, the proportion of prime grade buildings is 47% in Auckland’s CBD, 62% in Sydney and 70% in Melbourne.

As stated above, the supply of prime grade space has been hampered by seismic issues. Buildings such as StatsNZ House and the BNZ building have been permanently removed from the city’s inventory while, more recently, Asteron House and the Meridian Building have been vacated while strengthening works are carried out. The Ministry of Education has also recently been forced to vacate their premises.

Source: Colliers Research

Auckland prime locations in demand While higher than Wellington’s, the proportion of prime grade space within Auckland’s CBD remains below that of the major Australian cities. Limited options and the desire from businesses and employees for better space will underpin the long term demand for new office space and drive development activity.

Over the five year period between December 2016 and December 2021 an additional 153,450 sq m of prime grade space was added to the CBD’s total stock. Development has, in recent years, centred upon areas which provide strong tenant appeal, primarily the core and waterfront precincts. However, the future provides a number of existing and new spots for contention.

The opening of the new Central Rail Link (CRL) stations at Aotea and Karangahape Road, scheduled for 2024/2025 will increase the appeal of surrounding areas to business given the ease of access for employees. Plans are already well advanced for large scale development above Te Wai Horotiu Aotea station, to include a substantial proportion of office premises.

Mansons TCLM’s development of some 29,000 sq m of space at 50 Albert Street is also underway, along with potential development plans at 5 Albert Street. Mansons plans for more office space in the Wynyard Quarter along with Precinct Properties’ new Wynyard Quayside developments are all adding to better working environments that are being demanded by businesses and their employees.

The potential implication for rents Increases to construction costs, delivery timeframe uncertainty, hybrid workings and rising interest rates, as well as the competition for limited land availability in prime spots, are all having a profound impact on demand expectations, values and development feasibility. However, there is currently upward pressure on end rentals. While demand and the ability to command higher rentals may be disrupted if economic conditions worsen dramatically over the short term, long term fundamentals and market constraints point to higher rents.

New build net face office rentals in Auckland are approaching $900 per sq m, in Wellington gross face rents are at similar levels, while Christchurch could see new build rents pushing $500 per sq m or more in the near future. Although these rates sit above current average prime rental levels, rising demand for better quality space, market constraints and rising inflation all point towards rising rents and be a necessary outcome for occupiers meeting the needs of their business for the future.

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Therefore, market demand for additional high grade office space within the city is clear. The development sector is responding to the demand with approximately 80,500 sq m of new buildings currently under construction including the 20,000 sq m Defence Force House and BNZ’s new headquarters at 1 Whitmore Street. Plans for Willis Bond’s latest development at 110 Jervois Quay have also been recently released with marketing underway. Upon completion of the current pipeline this will increase the prime grade sector’s share of total inventory to around 30%. This, however, remains well under that seen in other major centres.

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This document has been prepared by Colliers New Zealand for advertising and general information only. Colliers New Zealand does not guarantee, warrant or represent that the information contained in this document is correct.

June 2022