Commercial property crisis gets worse

[fudosan]

Commercial property vacancy in Auckland has reached a new high with 9.5% of all offices now empty, but this is in line with gloomy expectations and previous predictions.
...
This is up from only 7.4% vacancy six months ago and a huge leap from the 5.3% vacancy there was in the area one year ago.

The number of offices sitting empty in Auckland reaching a new high can be significantly attributed to new build 21 Queen St being completed but remaining mostly untenanted.

Big drop in prices would be very much welcome.

Source: http://www.nbr.co.nz/article/commerc...s-worse-114428

[Dean@Massiveaction]

So we enter the second half of the W, only this will be worse IMHO.
Resi in Auckland has ground to a halt as well. Our dollar is sending overseas investors back offshore

[Davo36]

Yeah I'm pretty relaxed about all of this.

If the second part of the W is about the same as the first then we'll have a slight downturn and then things will pick up again. Australia won't even have the downturn bit!

[Mr_bond]

Bear in mind the current vacancy numbers won't include;
- Telecom and associated companies moving up to Victoria St
- Ernst and Young and Westpac moving down to Britomart
- Deloite and BNZ moving into Deloite buiding.

I reckon just with that lot we are talking about space bigger than 21 Queen Street becoming vacant in the early part of next year.

Watch this space.

[Dean@Massiveaction]

I don't know Dave. Ozzy may think they have escaped but lets see in 12 months. Eventually the global printing presses get turned off and it could be a different story. Having said that the compulsory super schemes in OZ certainly make an enormous difference to the nations wealth and that is without doubt helping them compared with NZ and the USA.

[fudosan]

While I know both Australia and New Zealand are in the same group of countries as the US having massive current account deficit, I find it difficult to predict when the time tomb will actually explode. Things have not been logical for quite a long time.

As this vacancy drama plays out, the Auckland CBD office property market will continue to be the most exciting place to watch, as far as I am concerned. Let's see if the 33% vacancy record achieved in 1992 can be broken.

I read some time ago from the news that the total office space in Auckland CBD is about 1.2m sqm and vacant space about 100,000 sqm. I'm interested in knowing where you can go to get such data, especially time-series data. Mr. Bond, do you know?

[Davo36]

I don't know Dave. Ozzy may think they have escaped but lets see in 12 months. Eventually the global printing presses get turned off and it could be a different story. Having said that the compulsory super schemes in OZ certainly make an enormous difference to the nations wealth and that is without doubt helping them compared with NZ and the USA.

Dean, weren't you advertising a "Conquer Australia" seminar series a while back? Lol.

The thing is while the US is a crazy-arse stuffed country for a while, China is importing as much Aussie mineral ore as it can. And they look like the will do for some time. In China there's maybe 200 to 300 million people who would have a similar lifestyle to us in the West. That leaves a billion still wanting that lifestyle. That's a lot of houses, appliances, cars, furniture, electronics goods and so on.

I guess what I'm saying is that I can't see the China thing slowing down any time soon. And the rest of Asia too for that matter.

And so surely this will keep countries like Aussie and NZ (which exports food) going as well?

[Dean@Massiveaction]

Nothing wrong with investing in Oz Davo, great bargains there currently :-)

[DaveW]

Dean, I'm interested to know what makes you say residential in Auckland has grounded to a halt?

[Dean@Massiveaction]

Anecdotal Dave but for example Ray White's auction in Bucklands beach monday 9 on offer only 1 sold at probably 25% under value. Spoke to 3 agents today all finding things slow. I talk to probably 25 agents in a typical week and my observation is things slowing fast. Plus I have property for sale in 5 different suburbs and I'm not being over run with offers

[Mr_bond]

I read some time ago from the news that the total office space in Auckland CBD is about 1.2m sqm and vacant space about 100,000 sqm. I'm interested in knowing where you can go to get such data, especially time-series data. Mr. Bond, do you know?

I'm not sure of anywhere you can get the time series for free. We, along with the other agencies, do our vacancy surveys which involves manually sweeping the office buildings for vacancies. Due to the time this takes we obviously need to charge for the data.

Total stock in our last one was 975,000 square metres. In the early 90s there was about 915,000 square metres total stock.

I'd imagine the numbers vary a bit between agencies, mainly as to where they define the CBD ends. Eg Symonds Street, Quay park, Fanshaw Street K rd etc.

[fudosan]

Total stock in our last one was 975,000 square metres. In the early 90s there was about 915,000 square metres total stock.

Only 60,000 sqm increase in more than 15 years? That's about 6 new buildings in the whole Auckland CBD over that period.

I'd imagine the numbers vary a bit between agencies, mainly as to where they define the CBD ends. Eg Symonds Street, Quay park, Fanshaw Street K rd etc.

I just follow TradeMe's much broader classification, which includes Symonds Street, Quay Park, Fanshwa Stree, K Road, etc.

[Mr_bond]

Don't ask hard questions!

Apparently the numbers quoted aren't exactly like for like, as over time we have 'evolved' our definition of the CBD.

Plus if you think of all the apartment buildings that have been built in Auckland CBD in the period (there were basically no apartment buildings in the early 1990s in Auckland CBD) and that these have all taken out commercial buildings, there will be a reduction in office stock.

Vero, PWC and Lumley comprise about 90,000 square metres all by themselves and they were all built in 2000-2005.

[fudosan]

Don't ask hard questions!

Asking questions is how I learn.

Plus if you think of all the apartment buildings that have been built in Auckland CBD in the period (there were basically no apartment buildings in the early 1990s in Auckland CBD) and that these have all taken out commercial buildings, there will be a reduction in office stock.

Thanks for pointing this out. I completely overlooked this aspect. There was massive conversion from office to apartment buildings in the 90s, led by Andrew Krukziener I think.