Businesses wanting to move into the Christchurch central business district are coming up against few options in the sought-after 200m2 to 600m2 office size range.
Perception vs Reality
The common perception that there is an oversupply of office space in the CBD does not accurately reflect the current situation.
People’s perception generally is that there’s a lot of vacant office space in the CBD, however the reality is that much of the vacant space is larger floor plates that can’t easily be split to meet the size requirement that is currently in high demand.
The majority of office tenants in the market now are looking for space between 200 and 600 square metres and there are definitely fewer options left in that bracket.
Smaller businesses are part of a new wave of office tenants who are ready to move into the CBD. Many of these are relatively young businesses which have outgrown their home-based or suburban offices and are now looking to attain the prestige of a CBD address.
There’s also an increased number of businesses who have signed leases over the past couple of years but have now found they’ve grown faster than they expected. These tenants are seeking larger premises while at the same time looking to sublet their existing space out.
Many tenants looking to move are in the information technology, media and professional services sectors. A number of tech and creative companies are eyeing the SALT district, with accountants, lawyers and recruitment firms looking at the core CBD and West End.
Value of the rebuilt CBD
In many cases, businesses have been waiting in the wings to see the rebuilt CBD come together and now want to be part of the action.
Before the earthquakes Christchurch was suffering from decentralisation of office and retail. There wasn’t any land in the CBD on which to construct new buildings. So businesses went to the suburbs and the CBD was in decline.
That’s all changed now. Businesses are now lining up to secure premises in a new building in the city centre, where their staff can access all the retail and hospitality amenities the CBD offers.
The almost-complete central city retail precinct, new bars and restaurants, laneways, the new library, the town hall, Hoyts EntX and several other upcoming projects including the Riverside Market and the convention centre are all contributing to encouraging the current wave of office tenants back to the CBD.
Potential CBD tenants have also watched locals’ attitude to the city centre changing as new amenities open and people become much more positive about the area.
This has been backed up by a recent Christchurch City Council survey, which showed an increase in Christchurch residents’ pride in the central city. Three quarters of respondents said they would speak positively about the central city, compared with 67 percent a year ago.
The transformation of the CBD is quite a big driver for businesses who are considering their next location. Our fantastic new commercial precinct is a huge plus for Christchurch businesses, who are competing to attract and retain staff against other cities in New Zealand and overseas.
Transport & construction
Parking issues are also slowly being alleviated with five multi-storey carparks now open in the CBD and a sixth underway, in addition to 30 car parks leased by operators such as Wilson’s. Cycleways are also being used by commuters, with e-scooters providing a further option to park outside the central city and ride a scooter to work.
Some businesses are also providing transport incentives to staff as they prepare to move to the CBD. Tenants are being quite creative with change management as they relocate from suburban locations, including offering transport allowances to incentivise staff to choose non-car options to get to work.
The growing attractiveness of the CBD has contributed to office leasing enquiry in general remaining at elevated levels. The office market has also remained fairly stable over the past 18 months, with the major post-earthquake developments complete or nearing completion.
Construction activity is now a fraction of what it was at the peak of the rebuild in 2015, with less than 10,000 square metres under construction at the moment.
Rents have also stabilised over the past 18 months and while incentives are still a feature of the market, negotiations between landlords and tenants have become more balanced than they were a year ago.
Image credit: 112 Cashel St, Christchurch CBD - Stephen Goodenough