Rents are expected to increase over the next five years as shortages bite
The commercial rental market in Wellington is being disrupted by a reduction in the number of seismically secure buildings, pushing up rents as shortages for safe office space bite.
Steve Maitland, director of real estate firm Colliers, said that when new seismic reports were released, buildings from a range of construction eras would be taken out of supply, while others at 33% of the New Building Standard (NBS) were sitting empty.
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“We are fully expecting that further buildings will be ‘red carded’, meaning that as new seismic reports are produced and received, some of these buildings will need to be vacated to be remediated,” Maitland told RNZ.
Some buildings, he said, would sit empty, other former office blocks would be repurposed, while some had been refurbished as hotels.
“There are plans for additional new buildings but the soonest delivery for these is most likely 2025,” Maitland said. “That leaves an immediate gap to be filled and this will exert continued pressure on the top end of the building market in Wellington, where seismic [safety] is still the major issue affecting tenants.”
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Previously, 68% of the new building standard was deemed acceptable, Maitland said, but new minimum thresholds of either 80% or 100% were being set by tenants.
“Demand has increased, and the supply has been taken up,” he said. “Things have got tighter and therefore rents have increased,” he said. “Our projection for the next four to five years based on buildings planned and buildings being constructed is that there will continually be an increase in rentals.”
During the 1980s and the 2010s, precast concrete or hollow-core construction had been frequently used in the construction of office blocks. Its deficiency was highlighted in 2016, however, when the 7.8 magnitude KaikÅura earthquake caused widespread damage to buildings with hollow-core flooring in Wellington.
That earthquake resulted in the partial collapse of the modern five-storey Statistics House on Wellington’s waterfront and the destruction of the former BNZ building, which has since been demolished.
“Many existing Wellington office buildings will not achieve 100% of the NBS,” Maitland told RNZ. “So, to have the new generation of buildings coming through offering this ‘peace of mind’ with new seismic credentials is paramount.”
