What is happening to those office
blocks built in the 1970s and 1980s that are now being vacated? Historic buildings with matai floors and fine architectural features are still being refurbished and converted to character offices and upmarket apartments, but mundane office buildings from the ’70s-’80s era are rejected by developers and buyers alike. The trend is to purpose-built apartments with space organised efficiently, security, sun and ample parking.
The city is slowly depopulating. Many businesses are moving to the suburbs and the fringe where rates and operating expenses are lower, parking more abundant and there is none of the congestion that blights city streets.
Technology is driving change, with more workers telecommuting from home or hot-desking, so that sales representatives with laptops need only to visit the office briefly to tie up their paper work.
The outlook for the CBD may appear bleak, with current oversupply of office and residential accommodation, but in its September publication Auckland Office Trends, Bayleys Research notes recent American experience as possible indicator for the future. The trend in the US is reversing as companies and investors are returning to revitalised CBDs, leaving suburban office space empty. They see the key to future prosperity lying in the creation of “people friendly” 24-hour city combining office, tourism, retail, residential and leisure accommodation and not in building more high rise office towers.
Bayleys exemplifies the trend to the new Golden Mile along the waterfront – they have just moved there from Albert Street.
Communications manager Neil Prentice sees activity still at the top end of the market for apartments and offices, with big legal and accounting firms moving to new buildings close to the waterfront. The downward cycle caused by over supply is hitting secondary buildings hardest, he says. “Because rentals are coming down, it will be challenge – there will be choice of reducing rent or leaving them empty.”
He points to Symphony Group’s redevelopment and strata titling of 300 Queen Street as solution. Each floor has been divided into six units with new services such as air-conditioning, and lower level floors have been converted to carparks so that each suite has one carpark. Professional services firms and information technology businesses wanting CBD presence are attracted by the affordability of this type of space, he says.
There is more choice outside the CBD now, with new developments in Newmarket and Greenlane where car parking ratios are better. Rates are cheaper, land prices lower and the larger floor plates are more energy efficient. recent survey on commercial office leasing listed the top five factors in the decision to accommodate business as availability of parking; cost; quality of building; access to main arterial routes; and access to motorways. Suburban accommodation fulfils all these requirements. With the Auckland City Council striving to prevent people bringing cars into the city by limiting the amount of carparking, the first of these factors is of prime importance. It remains to be seen, Prentice says, whether the current move out of the CBD is long-term trend or simply part of the cyclical nature of the property market.
Maximising space
Murray Jordan, of the AMP Office Trust, is, despite the recent big drop in the value of its buildings, excited about the construction of the PricewaterhouseCoopers Tower due to be completed in May 2002. “We had tenant demand – it was the only reason we are constructing the tower,” he says. It is already 54 percent pre-leased, with PricewaterhouseCoopers taking 8112 square metres, and Buddle Findlay and ANZ Bank 4056 square metres each.
Old stock is small, inefficient and lacks carparking. People are upgrading their requirements in terms of quality, he says. The key determinants are services, lifts, size of floor plates suitable for open plan and premium space used more effectively.
The Tower has floor plates 1357 square metres per floor compared to an average of 600-700 square metres in the city. The floor is triangular and all the columns are external so that what you rent you use. Operating costs are cheaper and more people can be housed. Whereas B and C grade stock will only house one person per 20-22 square metres, the Tower will house one person per 10-15 square metres. They are not crammed because there are no columns or lift shafts taking up space. There will be 15 parks per floor and link at foyer level to the Downtown Carpark.
There are large number of corporates who wish to retain head office function, Jordan says, and its tenants are those who have very good reasons for being in the CBD as well as enjoying the proximity to the water, the very essence of Auckland.
There is one service AMP cannot provide however, which Jordan sees as vitally important to the future of the CBD: viable and sustainable public transport system.
Inner city advantages
Chris Minty, managing director of Symphony Group, believes that west (towards the Viaduct Harbour area) is best. “It is pleasant environment blending residential, retail and office space,” he says. “You can shop, live close to your office and go for stroll along the foreshore. It helps make Auckland better place.”
Symphony Group is strong player in the central city market. It began with the development of the old Farmers building into Heritage Auckland and the Heritage Tower. It has refurbished the Turners & Growers market into offices tenanted by AGC, and retail outlets and is opening food emporium there. “People demand daily shop with fresh produce and meals to take away and heat, all placed in one or two bags,” he says.
The adjoining piece of land in the America’s Cup village will be launched to the market in late October as residential scheme. “They will be homes as opposed to apartments,” says Minty and will range in size from 100-350 square metres. Anything that is really good will sell and maintain its value, he maintains, and as the Viaduct is an environment limited by geography, demand will always exceed supply in good quality buildings. He extols the advantages of serviced apartments in the Heritage Tower, the ease of living in secure environment with room service. Many professional people with children off their hands live in the CBD, with beach house for weekends, he says.
Although he concedes that there is drift out of the CBD, exacerbated by problems with parking and public transport, he sees movement from South Auckland back to the city and fringe. “Human beings are social animals,” says Minty. “There will always be demand for central office buildings as people need to communicate directly with each other.”
Michael Webb-Speight of Colwall Property Investment agrees. “It is easier to work in working environment,” he says. But the workplace has to be attractive and economical. The WestpacTrust Tower, which he describes as “a good old ’80s building”, with 730 car parks is unusual in the CBD.
“We spend lot of money enhancing services to ensure that we are up to the minute and can compete with cost per square metre per person,” he says. “Lifts, security system and air-conditioning have been upgraded so that we compete with the best in the market at competitive rents.” The modernising process is continual and the lobby is next to have face-lift.
Colwall Property Investment is unique, he says, because its multidisciplinary operations, including office space, Centra Hotel, Atrium on Elliott and car parking, are all in the same location.
Webb-Speight is confident for the future, predicting that the migration from the CBD of the late ’90s is reversing.
The jewel in the crown
David Henderson, managing director of Kitchener Group, has absolute faith in the future. The former rusting sheds of Prince’s Wharf and the overseas passenger terminal are in the pr
