Despite a slowing economy there has been an increase in demand from tenants looking for quality office buildings with large floors and a higher seismic rating in Wellington, according to office leasing expert and Colliers Director Steve Maitland.
A slowing economy might translate into a reduction in space required by tenants but the uptake of larger floors to achieve greater efficiency comes as no surprise.
In Wellington this is particularly prevalent with virtually all the new buildings constructed in the past 12 months now at 100 per cent occupancy.
“These new buildings generally have larger floors, ranging from 900sq m to 1,700sq m, as well as improved building services.
Start your property search
"The seismic solution is either base isolators or ‘viscous dampers’ (dynamic pistons embedded at various points within the frame) providing tenants with a higher threshold and safety rating in the event of an earthquake,” Maitland says.
“Base isolation has been the leading solution in recent years but new technology in viscous damping has become a viable alternative for some buildings. Virtually all new large-scale office developments, or refurbishments, incorporate these technologies in some form.
“Office rents have been increasing, operating costs are also increasing, and the tenants are absorbing these additional costs but often in more modern, efficient office environments.”
Businesses recalibrating post-Covid, based on smarter technology and new ways of working, are becoming leaner but not meaner, according to Maitland.
When it comes to lease end and a search for new premises, the average business can reduce their premises size by at least 20 per cent.
However, because of flexible working practices, some businesses have noticed a dramatic swing away from the office approaching a 50 per cent reduction in space required.
Many businesses, especially in the technology sector, are showing a willingness to allow staff a greater level of autonomy by working from home.
A low unemployment rate has contributed to a willingness to adopt flexible working, but the growing sentiment is that a return to the office and a stronger management policy around remote working will result in more staff returning to the office, especially if unemployment continues to creep up, shifting the balance in favour of the employer.
“Overall, seismic concerns are paramount. We have a market nervous about buildings which are considered or even rumoured to be substandard. The tenant market is heading towards higher NBS ratings and demonstrable seismic resilience measures that act as an insurance policy to safeguard staff,” Maitland says.
While 68 per cent NBS used to be the base minimum acceptable to businesses over recent years, this has increased.
The new unofficial but widespread demand is a level equivalent to 80 per cent NBS or higher.
If buildings cannot demonstrate this level, tenants are voting with their feet and seeking alternative premises leading up to lease expiry.
The latest office new-build developments in Wellington have all been constructed with improved seismic resilience and improved workplace efficiency at the forefront, with NBS ratings at 100 per cent and their engineers are indicating resilience levels in excess of that number.
For example, a 4,000sq m office development by Willis Bond at 15 Customhouse Quay (completed in 2022) is 100 per cent leased, floors are 900sq m, and it was constructed with base isolators.
Another example is Precinct Properties’ two-building development of approximately 20,000sq m in Bowen Street – Bowen Campus Stage Two – which has recently been completed and only 457sq m remains available. Typical floors are 1,200sq m to 1,700sq m and the seismic solution is viscous dampers.
Looking south in the CBD, Willis Bond’s office development, which adjoins their Victoria Lane apartment scheme, is 100 per cent complete and close to being fully leased with Tonkin + Taylor leasing a whole floor of 1,100sqm.
The remaining space is under negotiation and expected to house two other businesses. The entire scheme – both the office and residential components – is constructed using base isolators.
One of the most prominent new developments, BNZ’s 20,000sq m waterfront Wellington headquarters in Whitmore Street is nearing completion with base isolators integral in the construction.
The developer, Newcrest Development from Auckland, also recently developed 20 Customhouse Quay further along the waterfront using the same technology.
- Article supplied by Colliers
