North Harbour Commercial Property Group
Ian Little, Associate Director, Research, Colliers | John Darroch, Director, North Harbour Valuers
Thursday, 30 March, 5.30 pm-7.00 pm
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More than 60 commercial property owners, tenants, and representatives from financial institutions, property lawyers, and associated trades gathered at the National Hockey Stadium to hear insights from two seasoned experts. Ian Little and John Darroch both have more than 30 years of industry experience and exceptional knowledge of the local area.
Ian began by explaining that, the turbulence of the last few years has resulted in more headwinds than tailwinds. However, some positive aspects – such as better-than-expected job security and a faster-than-expected rebound in tourism – remain firm.
The pace of OCR hiking rates has been very unusual, and there is still uncertainty about where this will plateau.
The good news, at least for owners of premium office space, is that vacancy rates are at only 2 per cent. However, the gap between premium and secondary locations is widening. Ian describes this as “the divergence of appeal, ” with tenants demanding workspaces that are easy to reach, have high green-star ratings, and nearby amenities (e.g., cafés). “There is rental growth, but the gap between the top and bottom is widening.”
The retail sector has been “buffeted” by Covid and now by the cost of living crisis. What’s helping to support retailers is “mixing experience with product”. For example, a bowling alley to re-energise a quieter part of a mall or the chance to blend your own coffee in a store that sells coffee pods. “When families visit together, they tend to stay for longer.”
The industrial sector remains strong, having benefited from changing retail habits and a construction boom. The desire for “food security” has fueled demand for, for example, cold storage. Across Australasia, industrial space availability is at “historically low levels”, driving “huge rental increases”.
Looking at investment conditions, Ian believes that “the tightening cycle has run its course” and that “yields have to soften as interest rates increase”. There continues to be activity, including locally, and Ian shared some of Colliers’ recent sales and leases to illustrate per sq metre rental and purchase costs.
North Harbour Valuers’ director John Darroch echoed several of Ian Little’s observations, describing the industrial sector as the “rock star performer” and noting that six-star green buildings have become the new norm for tenants’ expectations.
John stressed the importance for landlords and tenants alike of measuring buildings accurately. The Property Institute publishes its Guide for Measurement of Rentable Areas. It costs $99 – John would prefer it was free! – and could be a helpful resource.
He then offered some advice about lease disputes, which can be expensive and acrimonious. If possible, these should be sorted out amicably, reaching a middle-ground before going to mediation.
A busy and wide-ranging Q+A session followed, including queries about Notices of Requirement (“a red flag on a title”), unconsented works (“a minefield”), average lease terms for retail and industrial spaces, and how many properties are sold off-market. There was also a question about how to identify leaky commercial buildings. There are strict time limitations, so the advice is to act quickly. John said the last three years of a body corporate’s minutes should reveal any potential known problems. These documents are not confidential, so, when requesting the minutes, “don’t take ‘no’ for an answer”.
Business North Harbour’s general manager Kevin O’Leary thanked both gentlemen and also showed appreciation to Janet Marshall, director at Colliers North Shore, for her kind assistance in putting the event together.
