2 Oct 2017

A tale of two cities

10:21 am on 2 October 2017

Two earthquake-hit cities are offering contrasting pictures of the national property market.

The building at 61 Molesworth St being demolished on Wednesday 21 December, 2016

The demolition of several office buildings in Wellington after the 2016 Kaikōura earthquake has put the squeeze on commercial space for rent Photo: RNZ / Aaron Smale

A review of the sector by commercial real estate brokers Colliers International showed a surplus of space and falling rents in Christchurch, but virtually no space and higher costs in Wellington after last year's Kaikōura earthquake knocked out several buildings.

Auckland and several provincial centres also had strong demand and rents as a solid economy underpinned business activity.

"Office sales are much stronger than the other commercial property sectors, and investor confidence remains high," Colliers national director Alan McMahon said.

"There is plenty of buoyancy in the market."

There was a large number of vacancies in Christchurch as the earthquake rebuild had peaked but businesses had yet to take up the space, he said.

Rents had fallen more than 6 percent to an average of $370 per square metre, from $395 in the year to June.

Mr McMahon said most of the vacant properties in Christchurch were suited for large tenants that could not be easily adapted into smaller spaces, which was where the demand was.

However, in Wellington there was virtually no spare premium office space and even second tier properties were in short supply.

"Some stock has been withdrawn from the market and some tenants have moved around to find safer buildings, there's no vacancy at all," Mr McMahon said.

New office space was coming on to the market but much of it was already committed to tenants, and that was forcing up rents as well.

The report showed strong population and employment growth, plus investment in infrastructure were underpinning the Auckland market generally and the central business district, in particular, with the result being higher rents.

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