PCNZ Market SummitA New Beginning
Gary Sellars
1 November 2012
2
Historic
3
Contents
›Then & Now
› CCDU - City Plan
›CBD - Build Potential
›Rebuild - Suburbs
›Rebuild - CBD
›Rents / Opex
›Supply / Demand
›Land Values
›Investment Market
›Summary
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Then & Now
2010Total Stock 446,002 m2
A Grade + 37,556 m2
A Grade 34,800 m2
B Grade 132,908 m2
2012 - ExistingTotal Stock 188,978 m2
A Grade + 37,556 m2
A Grade 6,957 m2
B Grade 45,940 m2
2012 - TenantedTotal Stock 56,525 m2
A Grade + 23,556 m2
A Grade nilB Grade 13,357 m2
› Total demolished to date: 258,184 m2
› Uncertain future of existing buildings› Existing designated land includes Forsyth Barr House and IRD Building
CBD Office Stock
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Then & Now
2010Total Stock 446,002 m2
A Grade + 37,556 m2
A Grade 34,800 m2
B Grade 132,908 m2
2012 - Existing Total Stock 117,190 m2
A Grade + 23,556 m2
A Grade nilB Grade 29,918 m2
2012 - TenantedTotal Stock 55,353 m2
A Grade + 23,556 m2
A Grade nilB Grade 13,357 m2
CBD Office Stock - Designation Land Excluded
(i.e. Land designated for key projects including the southern and eastern frame.)
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Location
CBD Tenanted Buildings
Area m2
Core 46,517Gateway 6,576Frame 1,172Mixed Use 2,261Total 56,525
82.29%
11.63%
2.07%
4.00%
Core
Gateway
Frame
Mixed Use
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CCDU
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CCDU
Central City - Business & Mixed Use Zones
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CCDU
Central City - Heights
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City Plan
Central City Business› Core - Urban design requirement› Core includes west of Avon River› Gateway - Victoria Street precinct
Central City Business - Retail Precinct› Precinct - Oxford Tce, Hereford St, High St & Lichfield St block› Minimum ODP area 7,500 m2
Central City - Mixed Use › Large format retail - Minimum 450 m2
› Balance zone - Limited retail› Maximum office GLA 450 m2
CBD - Potential Build
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CBD Core - Case Study 1› Maximum 7 levels› Minimum 2 levels› Average proposed office build/land ratio 2.0› Average proposed Cathedral Square office build/land ratio 5.25› Vacant block land area 16,610 m2
› Office build/land ratio 4.5 = 74,700 m2
CBD - Potential Build
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CBD Core - Case Study 2› Ngai Tahu - KEB Site - West CBD core› Vacant block land area 16,610 m2
› Adopting office build/land ratio 3.0 = 49,830 m2
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Build - Suburban
Offices - Built Since 2011Burnside - Russley 8,637 m2
Addington 1,600 m2
Middleton - Riccarton 2,000 m2
Total 12,237 m2
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Build - Suburban
Offices - Confirmed DevelopmentsBurnside - Russley 17,982 m2
Addington 17,226 m2
Middleton - Riccarton 6,035 m2
Total 41,234 m2
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Build - Suburban
Offices - Proposed DevelopmentsBurnside - Russley nilAddington 6,400 m2
Middleton - Riccarton 1,200 m2
Total 7,600 m2
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Rebuild - Suburban
Offices - Confirmed & ProposedBurnside - Russley 17,982 m2
Addington 23,626 m2
Middleton - Riccarton 7,235 m2
Total 48,843 m2
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Rebuild - CBD
CBD - Office SpaceBuilt Since 2011 5,683 m2
Confirmed 34,676 m2
Proposed 159,850 m2
Total 200,209 m2
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Rebuild - Christchurch
Christchurch - Confirmed & ProposedCBD 194,526 m2
Burnside - Russley 17,982 m2
Addington 23,626 m2
Middleton - Riccarton 7,235 m2
Total 243,369 m2
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Rebuild - CBD
Developer Profile
Profile # Area m2 %Existing owners 20 116,346 60%New owners 9 78,180 40%Total 29 194,526 100%
Profile # Area m2 %Local 28 163,526 84%Not local 1 31,000 16%Total 29 194,526 100%
› Not local - Crown Precinct
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Rents
Rents› History
› Current Suburban
› Current CBD
PricewaterhouseCoopers $270/ m2 netHSBC $350/ m2 netHazeldean Business Park $260/ m2 net
Addington $350 - $365/ m2 netBurnside $300 plus/ m2 net
Confirmed Leasing $350 - $400/ m2 netAsking $400 - $450/ m2 net
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Rents
Auckland / Wellington Office Rents
Christchurch Operating Expenses
› Insurance - Key component› Rates potential to increase
Suburban $70 - $80/ m2
CBD $100 - $140/ m2
Auckland - Premium $530/ m2 netAuckland - A Grade $385/ m2 netWellington - A Grade $425/ m2 net
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Supply/Demand
Total occupied CBD 2010 382,222 m2
Adjust workplace density* 15.25 / 20.6 m2 282,956 m2
Addington vacancy 2010 13,500 m2
Christchurch built post 2011 17,920 m2
Christchurch confirmed & proposed 243,369 m2 274,789 m2
Net indicated shortfall 8,167 m2
› *Christchurch pre 2011 had an average of 20.60 m2 per person versus the Auckland and Wellington average of 15.25 m2 per person
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Land Values
Location of Sales
Sales before July 2012
Sales after July 2012
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Land Values
Land Values› Large number of sales› Victoria Street $1,500 - $2,500 m2
› Victoria Street average $2,000 m2
› One purchaser developer dominant in Victoria Street› Northern fringe - Kilmore Street $1,100 - $1,200 m2
› North Cathedral Square - The Press land $1,500 - $1,800 m2
› Colombo Street small retail $1,000 - $2,100 m2
› South & east edges - former B3 $450 - $600 m2
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Investment Market
HSBC House› 62 Worcester Street› Walt: 6.35 years› Sold May 2012› Sale price: $26,000,000› Market yield: 10.99%› Purchaser: Christchurch investor
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Investment Market
Press House› 158 Gloucester Street› Walt: 15.51 years› Sold: July 2012› Sale price: $19,030,000› Market yield : 8.74%› Purchaser: Christchurch investor
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Investment Market
Aon Building› 400 Blenheim Road› Walt: 8.49 years› Sold June 2011› Sale price: $7,120,000› Market yield: 8.10%› Purchaser: South Island group
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Investment Market
Downer EDI Building› 55 Shands Road› Walt: 14.00 years› Sold April 2012› Sale price: $6,600,000› Yield: 7.25%› Purchaser: Christchurch investor
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Investment Market
Small Suburban Investment Properties› Modern› Well located› Well leased› Market yield range 7.00% - 8.00%
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Summary
Development Issues› Increasing building costs› Rent affordability› Insurance impact on opex› Office demand› Land utilisation› Tenant appetite for repaired buildings› Investment treatment of repaired buildings› Attracting outside capital