Concern with earthquake-prone buildings continues to dominate many aspects of commercial property in Hawke's Bay, leading to a 175 per cent increase in advertised office space since May.
The Hawke's Bay Commercial and Industrial Property Market Report, for the first and second quarter of 2012, indicates a "supply bubble" as developers and landlords respond to the seismic status of buildings.
The report, from property analysts and valuers Turley and Co, labelled the speculative response as "overstated" and "ridiculous" with 21,500 sq m of office space being offered in the past three months. The figure equates to 3.1 rugby fields, or enough office space for 1100 people at a ratio of 20 sq m per person.
The total amount of office space to lease being redeveloped, as well as proposed new buildings, brings the amount of office space advertised in Hawke's Bay to 33,800 sq m for the 15-months to July, the equivalent of a 24-storey building at 1400 sq m per floor.
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Of the additional space offered since May, 63 per cent is advertised as at least 80 per cent of the New Building Standard in terms of seismic performance. "Seismic performance status (NBS rating) is in 2012 a top-of-list item causing pain, uncertainty, opportunity and mostly tenant-led activity," the report said.
Soft underlying office demand and oversupply of space was expected to persist into 2015-16.
The report said seismic status was becoming a make or break factor in sale deals and predicted major winners and losers in the future. It also predicted some heritage architecture would be lost.
The outlook for quality retail property, typically the most buoyant property investment subset, was muted, but at prime sites the vacancy risk was modest and rents were stable, the report said.
The prognosis for the industrial investment market concluded: "We still predict land value and rental value growth for most Hawke's Bay industrial property is more likely to be negative to flat into 2013 with moderating still cap rates [yields]."
Although forecasts for commercial and industrial property trends for the rest of this year and the next were difficult to predict, the report said possible tenant-led relocations due to seismic status could accentuate the rental value divergence between quake-prone buildings and others that were not.