Auckland in 2030: how corporate migrants will transform city
Auckland in 2030: how corporate migrants will transform the city
James Kellow of NZMS predicts:
• 60% of the country’s business population will be based in Auckland.
• Demand for high spec headquarters will outstrip supply.
• Buildings increasingly custom-designed for tenants.
• Longer lease terms to underwrite new development in the city.
Auckland’s draft Unitary Plan has been the subject of vigorous debate recently, with a predicted population increase of 1 million by 2041 being widely regarded as unachievably high.
James Kellow, a Director of New Zealand Mortgages & Securities, believes that figure is not only likely, but may well be exceeded. He says that, as early as 2030, 40% of the New Zealand population will already be residing in Auckland. “This growth will be driven by “corporate migrants” – businesses and individuals relocating from other areas of the country. And the ramifications for the commercial property sector will be enormous.”
In 2012, a report written for the Auckland Council by NZIER identified that, post- earthquake and facing potential building delays, investment capital could move from Canterbury to Auckland, following a surge of skilled, high-income individuals moving north.
Companies are also shifting from Christchurch and Wellington. Icebreaker’s marketing team and the New Zealand Olympic Committee’s entire head office, for example, have confirmed they are leaving Wellington for Auckland.
“This trend will only accelerate over the next two decades,” Kellow believes. “As well as placing pressure on the housing market, it will transform the commercial property sector. Agencies are already forecasting the top end of the leasing market will be under significant pressure due to the lack of options, and this will only get more severe.”
Kellow is uniquely placed to draw his conclusions. He has been personally involved in more than $5 billion worth of property finance transactions, and since 1983 New Zealand Mortgages & Securities has provided finance for many of Auckland’s most high profile commercial and large scale residential projects.
“The expansion of the city will be to the West, particularly the Waterfront, Victoria Quarter and Viaduct areas close to the popular Ponsonby/Herne Bay catchment where many corporate managers live. An example of development activity specifically targeting this market is the new building under construction by Mansons TCLM, consisting of 20,000m2 at 151 Victoria Street West. Another, smaller example is the complete upgrade of the Kauri Timber Building on Fanshawe Street.
To fund these new buildings, developers will require long leases (10 years plus), following the lead of ASB, who have signed an 18-year lease. With office rental growth of 4-5.5% predicted over the coming years by valuers Colliers, CBRE and Jones Lang LaSalle, many tenants are looking to their landlords to lock in their rental increases.”
Kellow also predicts that custom builds will become more commonplace, like the recently announced Fonterra Headquarters on Viaduct Harbor Holdings Land at Fanshawe Street, which has been designed specifically to suit Fonterra’s requirements.