Fringe CBD office building in Grafton looks over Auckland Domain

The Grafton Rd building has 2009sq m of lettable area. Photo / Supplied

A four-level office building at 52-54 Grafton Rd on the fringe of Auckland's CBD is up for sale or lease, with a recent lease of a 311sq m office area at 30 per cent below the rate negotiated in the building just over a year ago.

The partially leased 1980s refurbished office building, comprising 2009sq m of net lettable area and 73 carparks, is at the lower end of Grafton Rd, adjacent to the Auckland Domain, and is being marketed by Geoff Graham and Bill Fenton of Bayleys Auckland Central.

Graham says the recent letting at $185/sq m net by Bayleys Auckland colleague Reza Bashari reflects a possible shift in the motivation of business accommodation decisions from absolute quality to balanced affordability.

"Accommodation costs are generally the second-highest overhead of most businesses and in the current and projected environment of cost consolidation, it's understandable that businesses are focusing more on the bottom line when it comes to deciding on their premises.

"There are more good-quality premises available at substantially reduced rentals from when the market was at its peak 18 months ago and tenants are shopping around."

Fenton says the Grafton Rd location is highly convenient in terms of accessibility to all motorway systems and the CBD.

"The space at 52-54 Grafton Rd is very tidy and functional, and the building has its own cafe with an open deck facing the Domain bush setting," he says.

"Clearly the quality and amenities of the Grafton Rd property do not match prime CBD office accommodation standards. But at $185/sq m net for office space, $48 per week for covered car parking and operating expenses at $75/sq m including rates, this accommodation is about half the cost of prime CBD office space."

Fenton says a number of landlords, such as the owner of this building, are willing to accept a market-related rental, rather than sit on an empty building hoping that rentals will increase again.

"Their perception is that vacancy rates and rental levels are likely to remain under pressure for some time to come and they are willing to negotiate with tenants."

The property is currently attracting interest from a variety of investors, tenants and owner occupiers. At present the building has vacant space of around 1300sq m.

"This is clearly a value-add proposition for an investor or owner occupier and the entry price is likely to reflect this," says Graham.

The property is currently producing net annual rental income of $246,236 but has an estimated total net market rental of $581,842.

It is on a quiet, sheltered 2492sq m site with a good outlook on to the heavily wooded Auckland Domain and is close to the intersection of Grafton Rd and Stanley St with dual site access to and from both streets, via Grafton Mews. It is also close to on and off ramps for the Southern, Northwest and Northern Motorway systems.

Graham says it has high profile and signage potential to Grafton Rd, with good exposure to high volumes of passing traffic.

The building has been progressively refurbished, including new ceiling panels, carpet and service amenities areas. Some floors have existing fitout which, Fenton says, is of a good standard and in a practical configuration for reuse.

The office space is air-conditioned, with fire protection and security access systems.