Increasing business confidence means companies that deferred office moves because of the global financial crisis are now back in the leasing market and looking to upgrade, says a director of one of Auckland's largest development and construction firms.
"Businesses are essentially getting sick of sitting on their hands and camping in stale old buildings," Culum Manson of Mansons TCLM told Bayleys' Total Property magazine.
"Much like upgrading computer software, buildings need upgrading to meet the requirements of modern workplaces."
With the desire to house staff in healthy, modern and efficient premises returning, the demand for new office space in particular is on the rise, says Manson.
Tenants are looking for high quality and healthy building services, such as more fresh air delivery in air-conditioning systems and good natural light in working and amenity areas.
"There is more emphasis now on providing a workplace environment that reduces staff turnover and sick days and increases productivity. People are spending more time at work so the desire to make this environment healthy and pleasant essentially drives the demand for quality office buildings."
Efficiency, both in space use and running costs, remains a key consideration for tenants as well, says Manson. "We have addressed this by focusing on developing medium-rise buildings with large floor plates of 1500 square metres plus. These types of structures use less energy and have lower operating expenses, which tenants pay for, than traditional highrise buildings.
"Bigger floor areas also mean less wasted space, which tenants end up paying for as well.
"While the rental rate is higher on a new building, design efficiencies mean the effective occupancy cost is quite often the same, and sometimes less, than what tenants were paying in their old building," says Manson.
Sustainability in design is also coming back into focus, with Mansons TCLM about to begin building its eleventh green star-rated office building.
"Green buildings are now essentially best practice for delivery of office accommodation," he says. "There's a perception that green buildings are more expensive but that's not true."
He says many corporates have found the green star rating a benefit in their decision making and it has given their consultants and facilities management teams the tools to reduce waste and increase operational efficiency.
There is also a wider global corporate requirement from foreign-owned businesses to comply with a sustainability standard, which the NZ Green Building Council rating system delivers.
Construction costs will go up throughout New Zealand as a result of the rebuild of Christchurch, says Manson.
"There are already signs of this occurring, with concerns being expressed that this will push up rents on new builds to the point where few tenants will be able to afford to move back into Christchurch's CBD," says Manson. "This, however, overlooks the fact that better designed, more efficient, low-rise office buildings mean tenants will need less space than they occupied in some of those inefficient old high-rise 'dungas' that have been demolished. So their overall occupancy cost won't necessarily be any higher.
"The main challenge - and opportunity - for the development market will be to build 'smarter' so that it will still be viable, through efficiency, for any tenant to upgrade regardless of rental levels. That's what Mansons is focusing on."
Manson says Mansons TCLM will continue to undertake developments on a speculative basis given the shortage of efficient green star-rated, large floor-plate office buildings capable of accommodating substantial tenants.
"Speculative development is not a new thing for Mansons. We've being doing it for many years and developed a number of buildings with big floor plates without tenant commitment in Auckland's Southern Corridor when demand for space in that precinct was taking off.
"Companies don't necessarily want to wait for years while a building they've committed to goes through the planning, consent and building process.
"New buildings which they can occupy immediately, or in the not-too-distant future, are often a more appealing proposition - which encourages us to produce more stock of this type to meet that demand."