A large, near-new office building in the Christchurch central business district, leased to the New Zealand Government and Lululemon and generating nearly $6 million in annual rent, has been placed on the market by exclusive agents CBRE.
The Grand Central Building at 161 Cashel Street is set to be the highest value office asset ever to transact in Christchurch’s history. It is for sale by way of an international expressions of interest campaign closing on Thursday March 25 at 4pm.
CBRE Christchurch managing director Tim Rookes, who is marketing the property alongside CBRE national executive chairman Brent McGregor and Wellington managing director Matthew St Amand, says the building is a “truly premium opportunity” in scale, quantum and tenant covenant; and presents an opportunity rarely seen on the open market in New Zealand.
“This is an exceptional opportunity for large national and international institutional investors to acquire a trophy commercial property asset with a government anchor tenant in the core central business district of New Zealand’s most modern city,” Rookes says.
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The freehold asset combines enviable build quality, tenant covenant and scale, along with a market-leading weighted average lease term of around eight years from the anchor tenant, says McGregor.
“The Grand Central Building will have national and international appeal, owing to its lease to the New Zealand Government, state-of-the-art design and build quality, position in Christchurch’s core CBD and strong cash flow. It will certainly be considered a one-of-a-kind opportunity that will attract institutional investors and offshore capital, given its size and lease security.”
The building is being sold by Grand Central (NZ) Ltd, a Singaporean-owned property investor and hotel operator which has owned the site since 1993.
Grand Central (NZ) Ltd and/or its associated entities also owns the Duncan Cotterill Plaza development on Victoria St on the Christchurch CBD’s northern fringe, as well as commercial investments in Auckland and Hamilton and hotels in Auckland, Wellington, Australia and around the Asia-Pacific region. In addition, the company owns a development site on the corner of Manchester and Armagh Streets in Christchurch, earmarked for a future hotel; a site in Auckland CBD which has resource consent for a 191-room hotel; and has recently divested the PWC Centre at 60 Cashel Street for $60 million.
The Grand Central Building was constructed in 2016 as part of a government initiative to return 1,100 staff from 13 government agencies into four new buildings in central Christchurch by the end of 2016, helping to support retailers and other businesses in the rebuilt CBD.
The building is now home to several hundred staff working under the Ministry of Business, Innovation and Employment (MBIE), the Ministry of Social Development and the Department of Conservation. This has resulted in the Grand Central Building emerging as the hub for central government in Christchurch.
The building has 14,119sq m of floor area across seven levels, with each floor providing up to 2,700sq m of premium office space. 67 car parks are situated on level one, with retail space and 153 cycle parks on the ground floor. The retail space is partly occupied by the Christchurch flagship store of Lululemon, an international activewear retailer.
Designed by Warren and Mahoney, the building was constructed to 100% of new building standard, boasting world-class seismic base isolation technology designed, tested and manufactured in San Francisco, says St Amand.
“The base isolation system provides a high tolerance to seismic forces by allowing the building to move up to 660mm in a large earthquake to dissipate energy. The building’s disaster recovery capability is further strengthened by a powerful onsite standby generator.”
The building has a commanding presence on Cashel St with a 60-metre long glazed frontage, says Rookes.
“This is a stunning building which creates a real statement on the core CBD landscape. The interior is just as spectacular, with a large full-height atrium and open staircase connecting the floors through the atrium. The upper floors also offer uninterrupted views across the city and the Port Hills.”
The large office floors offer a high degree of flexibility, with excellent natural light from the external glazing and internal atrium. The building also provides gym-style end-of-trip facilities and several sustainable features consistent with NABERS energy efficiency guidelines.
The government lease currently covers levels two to five, with MBIE holding an option over the remaining office space on level six. This floor, as well as the available ground floor retail space, will be subject to a vendor underwrite.
The high-value end of the commercial property market in Christchurch has become increasingly buoyant over the past year, with yield compression and strengthening rents expected to continue into 2021, Rookes says.
“The Christchurch investment property market is expected to continue its growth trajectory with activity likely to exceed 2020 levels. This is driven by a tightening supply of CBD office space and the insatiable appetite among national and international investors for quality income-generating assets, fuelled in part by low interest rates.”
The building occupies a 3,624sq m site that was previously home to the 20-storey Hotel Grand Chancellor, demolished in 2012 after sustaining serious earthquake damage.
The site is well-located in the core CBD, surrounded by banks, national and global retailers and hotels; while also linking to the SALT District and the future multi-purpose stadium site, says Rookes.
“The Grand Central Building is enviably situated at the confluence of Cashel and High Streets, close to the upcoming stadium which will ignite the neighbouring SALT District. The One Central inner-city living development will also be a further catalyst benefiting the retail opportunity of Grand Central over the long term.”
