CBD office rents on the up

Press Release – Colliers International

Auckland, October 1, 2018 Prime office rents in Aucklands CBD are expected to rise by up to 5 per cent a year until more supply becomes available in 2020, according to new forecasts from Colliers International.CBD office rents on the up
Auckland, October 1, 2018

Prime office rents in Auckland’s CBD are expected to rise by up to 5 per cent a year until more supply becomes available in 2020, according to new forecasts from Colliers International.

The latest Colliers Essentials reports offer snapshots of the CBD office markets in Auckland and Wellington.

The research shows prime office vacancy in Auckland CBD has decreased for the first time in almost three years, to 3.5 per cent.

Secondary vacancy has increased to 8.1 per cent, but is still well below the long-term average.

Chris Dibble, Director of Research and Communications at Colliers International, says the squeeze on space will contribute to ongoing rent increases.

“Prime net rents in Auckland’s CBD are forecast to increase from an average of $478 per square metre in June 2018 to $561 in June 2023 – an increase of 17.4 per cent over the next five years.

“Secondary net rents are forecast to increase more slowly, by 7.5 per cent over the next five years, from an average of $265 to $285 per square metre.

“This represents an overall average net rental growth of between 3 to 5 per cent a year in the coming few years – at least until more supply comes online in 2020.”

Some 95,981sq m of new office space is forecast to be developed over the next five years, representing 6.6 per cent of the current total floor space.

However, Dibble warns this is unlikely to satisfy occupier demand over the long-term.

In Wellington, CBD office rents are also forecast to increase despite new stock on the horizon.

“New gross rental benchmarks are being achieved with limited tenant incentives due to a strong occupier demand environment,” Dibble says.

“Average prime gross rents are forecast to increase by 12.9 per cent over the next five years, from $498 to $562 per square metre.

“The average secondary gross rent is also likely to climb by about 7.8 per cent, from $260 to $280 per square metre.”
Office space in Wellington’s CBD remains tight, even with the completion of two new prime office buildings, adding another 25,180sq m, and two major office refurbishments, adding 16,430sq m.

More office space is coming, with Precinct Properties announcing two more buildings at the Bowen Campus, to be completed in late 2021, which will add some 22,000sq m to Wellington’s prime office stock.

Dibble says yields continue to firm and sale activity remains buoyant in both main centres, due to a low interest rate environment, boosted by offshore activity.

In Auckland, major transactions have included Precinct Properties’ sale of 50 per cent of the ANZ Centre for $181 million to Invesco, and Goodman’s sale of the VXV office portfolio at Wynyard Quarter for $635m to Blackstone, for a yield of 6.6 per cent.

Both sales are subject to Overseas Investment Office approval.

In Wellington, offshore investor Credit Suisse purchased the HSBC Tower at 195 Lambton Quay for $102.5m. This was the second office asset over $100m to sell to an offshore purchaser in 2018.

Yields in Wellington’s CBD office market have firmed a further 25 basis points compared with a year ago. However, seismic issues remain a focus for any occupier and investor in Wellington.


ENDS

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CBD bar plans outdoor dining after council comes knocking

A POPULAR Toowoomba CBD bar has proposed outdoor dining in its laneway after the council alleged it was not complying with car parking conditions.

The Florence Public House, which used to be called the Office before it was sold earlier this year, has operated both indoor and outdoor dining for several years since it opened.

Based on plans from the original 2015 application, the laneway is actually made up of five car parks that were to be used at certain times of the day.

The Florence Public House is now open in Duggan St. Thursday, 26th Jul, 2018.

The Florence Public House is now open in Duggan St. Thursday, 26th Jul, 2018. Nev Madsen

But according to documents submitted by Precinct Urban Planning on behalf of applicant GW Unit Trust, the council sent a non-compliance notice in early September surrounding the use of the laneway.

“Discussions were held (on September 19) with council’s manager (of) development assessment in relation to the above non-compliance correspondence,” PUP’s Paul Kelly wrote.

“During these discussions it was confirmed that the land owner had installed a temporary stage at the Duggan St entry to the car parking area which not only prevented access to the car parks but potentially affected the ability to service the grease trap located within the private laneway.”

Council officers confirmed the applicant could make a change, removing the car parks as well the prior laneway lease agreement and set the space as outdoor dining.

The owner will also install a partially-covered roof over the laneway, while also maintaining pedestrian access from Duggan St out to Ruthven St.

Brisbane publican Mic Uebergang and chef Karl Voll bought The Office in May after the previous owners went into administration.

The space was renovated and a menu offered up, with plenty of floral aspects to the intent of the venue.

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Bars and restaurants urged to move into Sydney’s abandoned railway tunnels hidden beneath CBD

ABANDONED tunnels, smothered in darkness and hidden for almost a century under the teeming streets of Sydney’s CBD, could be thrown open to the public under an ambitious new plan.

Despite a sometimes dank atmosphere and tales of ghosts in its farthest corners, NSW Transport Minister Andrew Constance said the subterranean complex was a “hidden gem” that could bring a $2 million boost to government coffers annually.

The St James tunnels were built as part of a never completed rail line from the city’s eastern suburbs to northern beaches.

But since the 1920s the only inhabitants have been military personnel during WWII, eels in an underground lake and, it’s rumoured, those with an interest in the occult.

Having given up the possibility of ever using the tunnels for rail use, the government has decided that rather than grabbing a train, Sydneysiders and tourists may want to grab a bite to eat and an espresso martini instead.

Despite the accumulated rubble, dripping roof and graffiti daubed walls, Mr Constance said it would be a relatively easy process to turn the 6000 square metre tunnel complex from spooky chambers to small bars and coffee shops.

“We’re going to open this train line in a way that was never expected. To take these 100 year old disused rail platforms and tunnels and turn them into opportunities for everyone to enjoy,” he said.

Talking to news.com.au Mr Constance said he could imagine an old railway carriage parked by the never used platform and turned into a fancy bar or restaurant.

“In London they opened up some of their disused tunnels and there are generating something in the region of a million pounds a year (AU$1.8 million) for the state,” he said.

Engineer John Bradfield, who was responsible for much of the shape of the current Sydney rail network including the tunnel system, also managed the construction of the Sydney Harbour Bridge.

Indeed, the bridge was designed to carry four railway tracks. Two are in use for the T1 North Shore line while two, long since covered with asphalt, would have led down to the now mothballed tunnels.

Signs of the long forgotten platforms are easy to spot. Local commuters will have noticed how St James station has a platform area larger than almost any other CBD station — that’s because it was designed to have another pair of tracks passing through.

The full extent of how large St James station was supposed to be becomes clear when you go beyond a nondescript green door.

There, in the half light, an entirely fitted out but unused platform exists waiting for a train that will never come.

So confident were early 20th century transport planners that the platforms would be used, station signs were affixed to the wall and tracks laid.

As the tunnels leave the station and plunge into thick blackness — towards Hyde Park in one direction and the NSW Parliament in the other — the rumbling of trains from the nearby operational lines shakes the decades of accumulated dust on the track bed.

Piles of rubble climb the walls while, in places, tree routes have burrowed their way in from the park above.

One of the subterranean spaces has flooded, the one-kilometre long tunnel is dubbed Lake St James and said to be home to several eels. That part will remain off limits.

The system, part of five kilometres of abandoned rail tunnels which includes deserted platforms at both Central and Redfern stations, has attracted thrill seekers and even devil worshippers, according to transport bosses.

“Are there ghosts down here? Is there the occult? Maybe there’s a bit of everything,” Sydney Trains’ chief executive officer Howard Collins said.

But the only spirits he’s hoping will soon appear are of the alcoholic kind.

“I don’t want to lose the historic feel; we should celebrate the railways, Bradfield, and this whole part of the city that is here buried and hidden under Sydney.”

The government has asked international real estate agents CBRE to drum up expressions of interest in the space with the hope conversion work can begin next year.

Mr Constance said the space was a “blank canvas”. But inspiration came from Grand Central station in New York, which has a world famous underground oyster bar, and Washington DC where disused tram tunnels are now an art gallery.

“Spaces like the St James tunnel are rare. Around the world, hidden spaces are being converted into unique experiences and we want St James station to be part of that. That’s why we’re casting the net right across the world.

“Better to take that history, protect it, clean it up, scrub graffiti of the walls and turn it into something everyone can enjoy. What a wonderful gem this could be.”

The minister said the tunnels could eventually form a subterranean link between St James and the new Sydney Metro station being built in Martin Place.

The tunnels were transformed into a bomb shelter during WWII with hand-poured concrete slabs poured over iron rods and built into the space to withstand explosions from above and within.

The shelters were to fit 20,000 people in the event of air raids. Armed soldiers guarded the site throughout WWII, ready to maintain law and order if the masses suddenly sought cover and protection.

The end of the tunnels are met with walls of rubble and exposed steel from when the army was instructed to destroy the shelters post war. But they didn’t get far before the operation was pulled. The bulk of the underground was subsequently preserved.

The eerie setting is one of many reasons film and TV producers and directors are drawn to the area. Its highest claim to fame came when scenes from blockbuster movie The Matrix were filmed there in 1999.

More than a decade later, Australian film The Tunnel, was also filmed in the underground passage. The plot involves a film crew that goes underground to investigate why homeless people are going missing. A lake monster kills the crew off one by one.

Sydneysiders will be hoping for a less dramatic dining experience if and when the doors are reopened on the city’s hidden, never used, rail platforms.

benedict.brook@news.com.au

Auckland and Wellington CBD office rents on the up

Prime office rents in Auckland’s CBD are expected to rise by up to 5 per cent a year until more supply becomes available in 2020, according to new forecasts from Colliers International.

The latest Colliers Essentials reports offer snapshots of the CBD office markets in Auckland and Wellington.

The research shows prime office vacancy in Auckland CBD has decreased for the first time in almost three years, to 3.5 per cent. Secondary vacancy has increased to 8.1 per cent, but is still well below the long-term average.

Chris Dibble, Director of Research and Communications at Colliers International, says the squeeze on space will contribute to ongoing rent increases.

“Prime net rents in Auckland’s CBD are forecast to increase from an average of $478 per square metre in June 2018 to $561 in June 2023 – an increase of 17.4 per cent over the next five years.

“Secondary net rents are forecast to increase more slowly, by 7.5 per cent over the next five years, from an average of $265 to $285 per square metre.

“This represents an overall average net rental growth of between 3 to 5 per cent a year in the coming few years – at least until more supply comes online in 2020.”

Some 95,981sq m of new office space is forecast to be developed over the next five years, representing 6.6 per cent of the current total floor space.

However, Dibble warns this is unlikely to satisfy occupier demand over the long-term.

In Wellington, CBD office rents are also forecast to increase despite new stock on the horizon.

“New gross rental benchmarks are being achieved with limited tenant incentives due to a strong occupier demand environment,” Dibble says.

“Average prime gross rents are forecast to increase by 12.9 per cent over the next five years, from $498 to $562 per square metre.

“The average secondary gross rent is also likely to climb by about 7.8 per cent, from $260 to $280 per square metre.”

Office space in Wellington’s CBD remains tight, even with the completion of two new prime office buildings, adding another 25,180sq m, and two major office refurbishments, adding 16,430sq m.

More office space is coming, with Precinct Properties announcing two more buildings at the Bowen Campus, to be completed in late 2021, which will add some 22,000sq m to Wellington’s prime office stock.

Dibble says yields continue to firm and sale activity remains buoyant in both main centres, due to a low interest rate environment, boosted by offshore activity.

In Auckland, major transactions have included Precinct Properties’ sale of 50 per cent of the ANZ Centre for $181 million to Invesco, and Goodman’s sale of the VXV office portfolio at Wynyard Quarter for $635m to Blackstone, for a yield of 6.6 per cent.

Both sales are subject to Overseas Investment Office approval.

In Wellington, offshore investor Credit Suisse purchased the HSBC Tower at 195 Lambton Quay for $102.5m. This was the second office asset over $100m to sell to an offshore purchaser in 2018.

Yields in Wellington’s CBD office market have firmed a further 25 basis points compared with a year ago. However, seismic issues remain a focus for any occupier and investor in Wellington.