blog
27 June 2022, by Paul Mautz
If you’ve started a search for good-quality space over 1000m2 in Wellington, you would have got a shock at how few good options are available. So why is this?
There are a number of reasons. First, there has been a continual flight to safety, quality and better building amenities by tenants. This means stronger, better designed buildings with good features, large floor plates and the ability to enable better ways of working are in demand. This trend is expected to continue.
Secondly, a number of major buildings have been taken out of circulation for re-strengthening and/or repositioning in the market. Tenants have had to find alternative accommodation, absorbing available space in the market in the interim.
Thirdly, government and businesses have continued to expand. Working from home, flexi-working and other new practices hasn’t yet had the effect of reducing overall demand for space.
Fourthly, while there has been a flurry of new buildings around the waterfront and elsewhere, these have existing high levels of precommitment leaving little excess space for other tenants. The space being left behind by those moving into these spaces is generally lower grade with ageing and seismic issues.
The pressure on space has flowed through to rents. A and B-grade rents have increased by upwards of 15% over the past three years and are expected to increase further. New, higher-quality space is attracting premium rents driven by inflationary and build cost pressures. These increases will flow through to the rest of the market.
So, what should you be doing if you have an impending lease expiry and you’re seeking more (or less) space? Here’s a few tips:
…18 months to two years early. Why? Because it takes a good year just to get clear on your requirements, work through your options, undertake lease negotiations (which may require landlord upgrade works) and complete documentation. Then there’s getting the layouts completed, costings prepared and budgets agreed. Once the design is ready, it needs to be tendered and consented (allow two months) before fitout works can get underway (if you can get a contractor and certainty on price). Then you need time for soft furnishings, IT/AV and security installations before relocating. Whew!
Think carefully about what you need well ahead
How do your staff work now compared to how you want to operate in the future? What aspects of the new premises provide the platform to facilitate these? What amenities do you want in the new building for staff? What buildings best represent you brand? Develop a brief of requirements that you can take to the market that’s clear, achievable and against which you can evaluate options.
Options are limited so you may need to re-test your original checklist. What were your original assumptions around location or space? What are you willing to compromise on and what’s locked in?
Make sure you or your adviser carry out due diligence on the building. If the building is touted as having a particular seismic rating, how current is that rating and does it reflect the level of risk you are prepared to accept? Any reports prepared prior to 2017 may not reflect the current seismic assessment guidelines. If it’s an older building, check if asbestos is present and whether your fitout works will disturb encapsulated content.
Also be aware if any major works are planned for the building that would mean the need to temporarily relocate elsewhere or result in a disturbance to you for a considerable period of time. Finally, are you on a gross or net lease? If net, you’ll need to pay a proportion of building operating expenses. These have been increasing rapidly over recent years as rates and insurance costs increase. So, find out what are the projected expenses for the year ahead are or seek to cap them if possible.
Once you are clear about what you need, engage your consultant and get options on the table. Look three years out if it’s necessary to get what you want and work up an interim solution. New builds are driven by tenant demand and pre-commitment so talking with developers now will get you ahead of others waiting until developments are more progressed. If it’s an existing building, find out from the owners what they have in their portfolio that’s coming up and how they might be able to accommodate you in the meantime. If you can get some leverage in negotiations, this will help in reaching a better deal.
The consensus seems to be that future vacant space and refurbished/restrengthened space coming back into the market will be quickly absorbed even with the current new build pipeline. At worst, we see vacancies stabilising in lesser-quality space and continuing to reduce in the more resilient, higher-grade buildings until demand subsides.
If you need any advice on moving premises, or you just want to renegotiate your existing lease, our property advisory team has the knowledge and experience to help you get the right outcome.
Photo credit: Tennent Brown Architects
Knows a lot about 1970’s music. Wears a hat. In-house quiz master. Sauv Blanc and MU fan. Prefers to spend winters in Europe. Learning the guitar.
Paul has been a senior member of our team since 2004 and specialises in premises procurement and leasing. With 25+ years' experience in the commercial property sector, he's been involved with a number of large leasing transactions, representing clients in project leadership and tenant representation roles.
10 September 2023
A better understanding by tenants of the seismic performance of commercial buildings continues to gain momentum.
Read more...
21 November 2022
“The NBS shouldn’t be the sole way for business owners and tenants to assess the risk to their people and business when signing up to a building” says TwentyTwo’s Paul Mautz.
Read more...
10 August 2022
MBIE recently issued guidance for building owners and occupiers on how to assess continued occupancy of a building with a low seismic rating – useful from a number of perspectives…First, it provides a sound framework...
Read more...
21 April 2021
If you’re leasing property, then somewhere within your rent payment will be a contribution to the building’s operating expenses or ‘opex’.
Read more...
21 September 2020
If you’ve been keeping up with the news on earthquakes and their effect on buildings, you would have come across much discussion on the performance of precast flooring systems.
Read more...
28 May 2020
While many organisations have a lot on their plates right now, sooner or later they’ll need to think about whether to relocate or stay in their existing premises when their lease expires.
Read more...
09 November 2019
“When TwentyTwo was approached in February 2018 to assist the NZ Defence Force with developing a new facility for their Youth Development Unit (YDU) for the Wellington region in Trentham, Upper Hutt, we jumped at...
Read more...
22 April 2019
Thinking of moving premises? Are you about to sign a new lease? Perhaps you’ve obtained a market rental valuation and what you’re being offered appears to marry up – on paper?Stop, pause and read on.
Read more...
30 April 2018
If you’re responsible for your company’s accounts or managing its property portfolio, you should be aware of the upcoming changes to the treatment of lease rent liabilities in the financial statements.
Read more...
06 February 2018
The risks around asbestos being present in buildings has been a significant issue for many years.According to Worksafe, it’s a leading workplace hazard with more than 170 people dying each year from past asbestos exposure.
Read more...
03 July 2016
I’ve recently been involved with a job that raises the question of just what constitutes an incentive or inducement in a leasing deal.
Read more...
03 February 2016
In 2013, 10 health regulatory authorities started a journey to collocate and create a model of one organisation providing the corporate services for all 10.
Read more...
30 June 2015
Over the last 20 years, an increasing number of New Zealand property professionals have focused their attention on providing advice specifically tailored to tenant and owner-occupiers of commercial property.
Read more...
04 June 2015
TwentyTwo's Associate Partner Paul Mautz MRICS FPINZ will be presenting the RICS Oceania three-hour training session covering Commercial Property Leasing.
Read more...
04 June 2015
TwentyTwo’s Paul Mautz acted as lead adviser for the Crown’s lease of space in the recently announced $150+ million, river-front office and apartment complex in Christchurch CBD.
Read more...Contact Dean Croucher +64 27 478 9589
Email dean@twentytwo.co.nz
Wellington
Historic House, 22 The Terrace, Wellington 6011
PO Box 10 747 Wellington 6140
+64 4 471 1054
Auckland
Generator, Level 12, 11 Britomart Place, Auckland CBD, Auckland 1010
PO Box 106 158, Auckland City, Auckland 1143
+64 9 282 4771
TwentyTwo Independent Property Advisers Limited is licenced under the Real Estate Agents Act 2008.
