Leasing switching in favour of landlords

Photo / Dean Purcell

Incentives for Auckland CBD properties are dropping away because of a decline in vacancy levels as the market shifts from tenants to landlords setting the agenda, says Scott Whitten, leasing broker with Barfoot & Thompson Commercial.

"Across the CBD there would be fewer than a dozen floors of 1000sq m plus available for lease," Whitten says.

In an article in the agency's latest Insite portfolio publication, Whitten says bigger private landlords are investing money in refurbishing their buildings in a bid to secure longer leases and good tenants.

"But they are cutting back on incentives unless they are getting improved lease terms and there is typically a relationship between the term of the lease and quantum of incentive."

Whitten's colleague, Sue de Jong, concurs, saying tenants are prepared to pay bigger rents for the right premises as more confidence comes back into the market.

It is a slightly different story in the suburbs. "Tenants can still negotiate generous rent-free periods for space in B- and C-grade buildings," says Barfoot agent Vanessa Coles. "The biggest incentives are being offered by private landlords as the institutional landlords focus on higher quality buildings," she says.

Coles says more companies are spending time working with fit-out companies on space planning and quite often repeat the process three or four times before they are satisfied - but it pays to shop around.

"An institutional landlord came to us with a quote of $850 per square metre to fit out 1180sq m of space.

"After he went to a fit-out specialist that we recommended he is now having the space refurbished for less than $400 per square metre."

Leasing broker Jan Workman says there was reluctance four years ago by tenants to take long leases and three to six years was the norm.

"Now there is a noticeable move to lease terms of five to nine years and more across all the precincts as tenants seek certainty and continuity in premises that suit their requirements and culture."

Workman says many office-based businesses can reduce their square metre per employee space with good planning.

Whitten says he and the agency's team of seven leasing brokers have noticed that one aspect of the market that hasn't changed noticeably is for tenants to seek new premises where they are already located.

"Whether they are reducing space or expanding into bigger premises they usually try to stay within the same general locality so their employees are not impacted upon by having to travel further to work."

CBD agent Rohan Cooke says websites are now a major initial information source for companies looking for new business premises but they usually end up consulting a broker when they come across "fishhooks" in their search.

"Some customers think they have found the silver bullet online but quickly realise they are given the barest details about properties, while we are able to brief them fully on what each property offers," he says.