'IT'S A BIT like putting an old Daimler in the garage and not driving it for 10 years," says CB Richard Ellis agent Jonathan Ogg of Mayoral Towers, the Queen St tower which has stood mostly unoccupied since completion in 1989.
But things are changing. The 19-storey building has two single-floor tenants and one of them, Toshiba, has bought the naming rights. It will take a six-year lease from the first day of the new millennium.
Tenancy requirements after the building was finished were for a single tenant on a long lease — 18 years, compared with leases these days for commercial space of nine or even six years — and a rent figure above $300.
The market did not meet the conditions and the building stayed empty, apart from the Queen's Head tavern on Queen St, an old pub which survived the 80s remake of Auckland's business heart, was refurbished and has traded through.
The asking price for office tenants is down to a realistic level and, since Armstrong Jones took over the building's management on behalf of the BHP NZ Steel pension fund in April, there has been some marketing of its empty floors.
Ogg has secured both tenants so far and hopes to secure retail tenants for the areas on each side of the foyer, a proposition which becomes more likely as the office marketing picks up.
The building was developed by Mayfair Corporation, one of the many property companies listed briefly in the 80s, and built by Angus Group. Mayfair's managing director, Gerald Williams, was previously Angus' development manager.
Both companies folded in the '87 meltdown. Mayfair's pre-crash assessment ranked the tower as a $30 million building on completion, but the company managed to leave it in the builder's hands in 1988 by writing back $1.8 million of unrealised development profits taken during the construction stage and paying $2.2 million of disposal costs.
The price tag to NZ Steel's pension fund was $24.2 million, but its 1997 government valuation (made without any cashflow) was down at $17.5 million, including $4.5 million for the site.
Armstrong Jones portfolio manager Doug Auchterlonie says the building has stood up well and some issues more important to end-of-the-90s tenants than those of the 80s are met.
The office floors have a 2.6m stud and floor-to-ceiling windows on all sides, with most of the 16 office floors offering tenants a net 567 sq m around the service core. "No point in the office space is more than 10m from a window," says Auchterlonie.
Every floor also has perimeter service and cable trunking all the way round and the tower has four lifts, although it could have been built with only two or three.
"People moving in will have a building 10 years old that has not had the use of the others."
Auchterlonie says many prospective tenants initially thought the building's floorplate was inefficient, but a variety of architects had worked on tenancy designs and showed the efficiency level was still good. "We've found you can fit 41 people in per floor on an open plan. In the closed office style of the legal firms you can fit 25."
Downtown leasing competition for Toshiba House comes now from the National Mutual (now Axa) Centre on Shortland St, expensively refurbished and with accountancy firm Ernst & Young back in. Effective rents on vacant space there are about $180 to $220 a sq m after incentives have been taken into account.
Also coming into the picture as refurbishment and re-leasing competition on Shortland St are the Shortland Centre and Auckland Club Tower, which will be
vacated by two of the city's big law firms when they move into the new Royal SunAlliance Centre.
Auchterlonie is finding plenty of people still happy with the upper reaches of the main Queen St strip, especially where they have good views and ready access to all motorways.
Lower rent levels make the area more attractive. In Toshiba House, low-level rents have been set at $145 a sq m, rising to $185 on the two floors below Toshiba's premises.
The top two floors have decks — the 62 sq m enclosed deck looking over the city from the 19th floor was designed to capture far less wind than most high-level balconies — and both floors have smaller internal floorplates, with rent set at $195 a sq m.
The proposed rent roll would put the building on an 8.1 per cent yield at the government valuation figure, very firm in a soft market but for space and services which have kept their condition.
"It's been well maintained. We're looking at buying properties and there quite a few only 10 years old that are in very poor condition — generally rundown building services, airconditioning plant that hasn't been maintained properly.
"This one's airconditioning specification was high and it's been run regularly."
Auchterlonie says largescale failure of window systems has been found in 80s buildings, with installation and specification problems in aluminium glazing and gaskets, but that has not proved a problem in this tower.
Auchterlonie wants a good tenant mix, but one which does not include tertiary institutes because other tenants do not want to be in the same building.
An unusual feature of the building is its ground-level theatre below the foyer, originally intended to have a lyric theatre like Auckland University's Maidment.
It has been left as a shell, waiting for a tenant to provide the finishing touches, but Auchterlonie and Ogg say it is more likely to be turned into a conference or training facility, and could become a gym. It has its own entrance off Mayoral Drive.
"We've had interest from a nightclub operator, but that's pretty much a no-no. There's a perception among other tenants that there will be a noise problem and it will heighten the chance of break-ins in other parts of the building," says Auchterlonie.
Along with that kind of concern, he says tenants generally are paying far more attention now to the compatability of neighbouring tenants. Whereas tenants sometimes sought clauses in their leases to keep out potential direct competition, now they will also demand the exclusion of certain types of tenant.