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  • 1. PCNZ Market Summit A New Beginning Gary Sellars 1 November 2012
  • 2. Historic 2
  • 3. Contents ›Then & Now › CCDU - City Plan ›CBD - Build Potential ›Rebuild - Suburbs ›Rebuild - CBD ›Rents / Opex ›Supply / Demand ›Land Values ›Investment Market ›Summary 3
  • 4. Then & NowCBD Office Stock 2010 2012 - Existing 2012 - Tenanted Total Stock 446,002 m2 Total Stock 188,978 m2 Total Stock 56,525 m2 A Grade + 37,556 m2 A Grade + 37,556 m2 A Grade + 23,556 m2 A Grade 34,800 m2 A Grade 6,957 m2 A Grade nil B Grade 132,908 m2 B Grade 45,940 m2 B 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 4
  • 5. Then & NowCBD Office Stock - Designation Land Excluded 2010 2012 - Existing 2012 - Tenanted Total Stock 446,002 m2 Total Stock 117,190 m2 Total Stock 55,353 m2 A Grade + 37,556 m2 A Grade + 23,556 m2 A Grade + 23,556 m2 A Grade 34,800 m2 A Grade nil A Grade nil B Grade 132,908 m2 B Grade 29,918 m2 B Grade 13,357 m2(i.e. Land designated for key projects including the southern and eastern frame.) 5
  • 6. Location CBD Tenanted Buildings Area m2 Core 46,517 Core 82.29% Gateway 6,576 Gateway Frame 1,172 Frame Mixed Use 2,261 Mixed Use 4.00% Total 56,525 2.07% 11.63% 6
  • 7. CCDU 7
  • 8. CCDU Central City - Business & Mixed Use Zones 8
  • 9. CCDU Central City - Heights 14 17 28 17 9
  • 10. 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 10
  • 11. CBD - Potential Build 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 11
  • 12. CBD - Potential Build 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 12
  • 13. Build - Suburban Offices - Built Since 2011 Burnside - Russley 8,637 m2 Addington 1,600 m2 Middleton - Riccarton 2,000 m2 Total 12,237 m2 13
  • 14. Build - Suburban Offices - Confirmed Developments Burnside - Russley 17,982 m2 Addington 17,226 m2 Middleton - Riccarton 6,035 m2 Total 41,234 m2 14
  • 15. Build - Suburban Offices - Proposed Developments Burnside - Russley nil Addington 6,400 m2 Middleton - Riccarton 1,200 m2 Total 7,600 m2 15
  • 16. Rebuild - Suburban Offices - Confirmed & Proposed Burnside - Russley 17,982 m2 Addington 23,626 m2 Middleton - Riccarton 7,235 m2 Total 48,843 m2 16
  • 17. Rebuild - CBD CBD - Office Space Built Since 2011 5,683 m2 Confirmed 34,676 m2 Proposed 159,850 m2 Total 200,209 m2 17
  • 18. Rebuild - Christchurch Christchurch - Confirmed & Proposed CBD 194,526 m2 Burnside - Russley 17,982 m2 Addington 23,626 m2 Middleton - Riccarton 7,235 m2 Total 243,369 m2 18
  • 19. 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 19
  • 20. Rents Rents › History PricewaterhouseCoopers $270/ m2 net HSBC $350/ m2 net Hazeldean Business Park $260/ m2 net › Current Suburban Addington $350 - $365/ m2 net Burnside $300 plus/ m2 net › Current CBD Confirmed Leasing $350 - $400/ m2 net Asking $400 - $450/ m2 net 20
  • 21. Rents Auckland / Wellington Office Rents Auckland - Premium $530/ m2 net Auckland - A Grade $385/ m2 net Wellington - A Grade $425/ m2 net Christchurch Operating Expenses Suburban $70 - $80/ m2 CBD $100 - $140/ m2 › Insurance - Key component › Rates potential to increase 21
  • 22. 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 22
  • 23. Land Values Location of Sales Sales before July 2012 Sales after July 2012 23
  • 24. 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 24
  • 25. 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 25
  • 26. 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 26
  • 27. 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 27
  • 28. 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 28
  • 29. Investment Market Small Suburban Investment Properties › Modern › Well located › Well leased › Market yield range 7.00% - 8.00% 29
  • 30. 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 30