Office and retail vacancies are at record lows in the Christchurch CBD, reflecting unrelenting demand for space as the central city continues to flourish, according to the annual Colliers survey, which was presented at the recent Property Council Market Summit.
Demand for city centre offices saw available space shrink to just 7.6 per cent.
The area known as West End, bordered by Cambridge Terrace and Kilmore and Montreal Streets, had the least amount of vacancy at just 5.3 per cent and there are no prime street frontages available in the retail precinct.
“There’s no doubt we’ve been in a challenging phase of the property cycle but there are some strong underlying variables supporting the Christchurch market,” says Marius Ogg, Investment Sales Broker at Colliers Christchurch.
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“The CBD is a really positive story, with a vibrancy we haven’t seen there for a long time, including before the earthquakes.
“Overall, though, I think vacancies have bottomed out in the office sector and there’s relief in sight next year as more new buildings and refurbishments come onstream. In the retail precinct, all the major projects have been completed and there are limited future options.”
New builds
Gary Sellars, Director of Valuation at Colliers Christchurch, says after four years of little or no additional CBD office supply, there is 28,500sq m proposed in the form of new buildings under construction or those that are being refurbished following a hiatus since the first wave of buildings were completed post the 2011 earthquakes.
“New builds under construction are 33 Cathedral Square, 72 Tuam Street, and three buildings at 211, 237, and 198-202 High Street totalling 8,435sq m. The former IRD building at 214-224 Cashel Street is being fully strengthened and refurbished, while 116 Worcester and 165 Hereford Streets are also being refurbished,” Sellars says.
“Completion of the buildings currently under construction or refurbishment will increase the CBD office stock to 415,000sq m, which is approaching the pre-earthquake stock level in 2010 of 446,000sq m.”
Suburban office vacancies dropped from 16.4 per cent in 2022 to 10.8 per cent in 2023 with Burnside/Russley the standout performer with vacancies at just 5.9 per cent.
Vacancies in Addington have improved from 16.5 per cent to 12.6 per cent and in Riccarton they have halved from 21.5 per cent to 11.1 per cent. There has been a significant improvement in Addington’s Show Place, where vacant office space has declined sharply from 24.6 per cent last year to just 4.5 per cent in 2023.
Industrial
Rents continue to rise in the industrial sector where demand for land is strong, supply is limited, and prices are rising.
Ogg is predicting blue-chip tenants will demand a new category of energy efficient industrial property with low carbon emissions.
“This is a worldwide trend that, in our view, will surface here. Previously it’s been the domain of office occupiers, but now large industrial tenants want highly efficient buildings.”
Meanwhile, although syndicators and trusts were largely absent from the Christchurch property investment market this year, private investors were out in force.
Capturing most attention were value-add properties.
“There’s an acceptance that market conditions have changed as we near the bottom of the property cycle before the recovery starts.”
- Article supplied by Colliers
