A reduction in the number of seismically secure buildings is disrupting the commercial rental market in Wellington as shortages bite.
According to real estate firm Colliers, there will be a continual increase in rents over the next five years due to high demand for safe office space.
Colliers director Steve Maitland said buildings from a range of construction eras would be taken out of supply when new seismic reports were received, while others were sitting empty at 33 percent of the New Building Standard (NBS).
“We are fully expecting that further buildings will be ‘red carded’ meaning that as new seismic reports are produced and received, some of these buildings will need to be vacated to be remediated,” Maitland said.
He expected some buildings would sit empty while other former office blocks would be repurposed. Some had been refurbished as hotels, he said.
“There are plans for additional new buildings but the soonest delivery for these is most likely 2025,” Maitland said.
“That leaves an immediate gap to be filled and this will exert continued pressure on the top end of the building market in Wellington where seismic [safety] is still the major issue affecting tenants.”
Maitland said where previously 68 percent of the new building standard was acceptable, tenants were setting new minimum thresholds of either 80 percent or in some cases 100 percent.
“Demand has increased and the supply has been taken up. Things have got tighter and therefore rents have increased.
“Our projection for the next four to five years based on buildings planned and buildings being constructed is that there will continually be an increase in rentals.”
The precast concrete or hollow-core construction was a widespread issue and had been frequently used in the construction of office blocks during the 1980s and more recently the 2010s, Maitland said.
The deficiency was highlighted in 2016 during the 7.8 magnitude Kaikōura earthquake when the shaking resulted in widespread damage to buildings with hollow-core flooring in Wellington.
In that earthquake two floors of the modern five-storey Statistics House partially collapsed on Wellington’s waterfront and the former BNZ building, completed in 2009, also located on the waterfront, was badly damaged and has since been demolished.
“Many existing Wellington office buildings will not achieve 100 percent of the NBS. So to have the new generation of buildings coming through offering this ‘peace of mind’ with new seismic credentials is paramount.”