Big organisations have led the return to a regenerating Christchurch CBD, leaving smaller operators in the suburbs according to commercial property company JLL.
After the earthquakes, small companies found office space in the city fringe and in the peripheral suburbs of Christchurch.
As those leases come up for renewal, these companies are now considering whether to move back into the CBD, or continue to take advantage of cheaper rent in the suburbs.
The average office floor plate in Christchurch’s CBD is around 1,000sqm, compared to 1,230sqm in Wellington and 825sqm in Auckland CBD.
Those big spaces have been designed to accommodate large corporations, but are generally too large for small to medium-sized companies.
“The big corporates have mostly committed or are in negotiation – that ship has mostly sailed,” JLL research analyst Tom Barclay says.
“The next phase, in terms of getting businesses back into the city, is the five to 25-person operations that need 50 to 350sqm of space.”
JLL commercial broker Nick Cape is working with lots of smaller companies that are struggling to find their next home.
“There’s definitely a lack of smaller CBD office spaces at the moment, and the question is, who will step in to help fill that need?
He says landlords who are keen to fill vacant space can look at splitting a large floorplate, but “the reality is it’s expensive to do that” – especially to put all the services in.
“Building owners who can convert a floor plate and make small spaces for office use will easily find suitable tenants,” Cape says. “Don’t assume that a tenant will be able to visualise the space divided up. You need to put the walls in so they can see it for themselves.”
Barclay says spending money on splitting a floorplate could prove to be an excellent investment for landlords, as they may well be able to achieve higher rents on a square metre basis by chopping up the space.
“Vacancy levels in Christchurch are predicted to rise as high as 25 per cent, so landlords will need to make to take action if they wish to fill remaining space in their buildings,” he urges.
“At present and for the next few years, tenants will find themselves in a strong negotiating position given the variety of choice they have in office space. Tenants can therefore leverage favourable lease terms and rental rates.
“We expect to see an increase in suburban vacancy rates as tenants move back to the CBD,” Barclay says. “The challenge for suburban landlords will be finding ways to keep good tenants.”
