The tower on a street popular with lawyers, financiers and insurance workers. Photo / Ross Setford
A $180 million, 30-level Auckland office tower owned by a European investor is almost half empty, according to a study out today from property agents and consultants JLL.
In one of the most glaring examples of commercial real estate's plight, the prestigious Lumley Centre on Shortland St in the heart of the city is 40 per cent vacant, JLL found.
But it's not the pandemic's fault.
Office blocks from London to New York and San Francisco have been emptied as workers stay home. But JLL cited the new $1 billion PwC Tower, rather than Covid, for Lumley's empty floors.
The report on commercial vacancies by its Auckland office says the premier tower at 88 Shortland St has 19,500sq m of office floor space yet 40 per cent of that, amounting to nearly 9000sq m, is vacant.
Lisa Chen, JLL senior analyst said: "There have been a number of recent moves from 88 Shortland St, including IAG (Lumley) moving out of levels 14 to 15, Macquarie Bank moving out of level 17 to DLA Piper Tower at 209 Queen Street temporarily because Macquarie has leased half of level 13 in the new PwC Tower, and MinterEllisonRuddWatts moving out of levels 18 to 20 into the new PwC Tower."
Auckland Council lists the tower developed by Mansons TCLM as being worth $180m, of which $58m is the land value. The council reaps $1.2m rates annually from the glass-clad building at the top of the street where lawyers, financiers and insurance workers are based.
Germany's Deka Immobilien Investment Gmbh owns the tower which has 194 carparks and is near the 40-level Vero Centre.
A Deka spokesperson said only one floor, level 17, was vacant and levels 18, 19 and 20 were still leased to a law firm. The spokesperson did not acknowledge that the law firm had left this month, indicating that perhaps rent could still being paid - so the owner does not technically acknowledge the high vacancy levels because the money is still flowing.
In 2014, the Herald reported on the tower's $146m sale to Deka, this country's biggest commercial deal in six years.
OneRoof listing data shows a big increase in the number of unfilled office and retail leases nationwide since April, when the country was in the first week of a lockdown that closed all non-essential of businesses and forced Kiwis to work at home.
The OneRoof figures showed a similar spike in the number of active listings advertising a business for sale.
The research suggests the country's commercial landlords are under extreme pressure and hint at further disruptions for New Zealand's economy, as it deals with a reappearance of the virus and a new lockdown in its biggest city.
According to the OneRoof data, there were 2,689 new listings advertising office space for lease between April 1 and July 31 – up 76 percent on the same period last year.
Bayleys agents Brendan Graves and Polly Markus have been advertising entire upper-level floors at Lumley: all 1301sq m on level 18, 1300sq m or all of level 19 and 1299sq m on level 20 as "large open-plan offices, convenient location next to Britomart and the Viaduct, on-site cafe, gym and business centre".
The same agents have also sought tenants for all of levels 14 and 15.
Rents in the building are understood to be in the $500/sq m-$600/sq m a year range.
On August 3, MinterEllisonRuddWatts left Lumley for Precinct Properties' new $1b PwC Tower at Commercial Bay. The law firm's Auckland office, with 245 people, is now on three and a half floors of Precinct's tower.
Precinct was said to be paying the law firm's Lumley rent for about two years to allow the lawyers to escape the tower, one property professional said. Asked if it was paying the rent, Precinct said it "did not comment on commercial contracts".
Andrew Poole, MinterEllisonRuddWatts chief executive, said: "Our move places us at the centre of Auckland's newest professional services hub and our work environment has been purposely designed to support collaboration, innovation and efficiency." The firm's design brief to architect Jasmax was also on wellbeing, he said.
Deka is upgrading Lumley's lobby and creating a more direct entry off Fort St to attract new tenants. Its New Zealand manager is Duncan Christie, of CBRE, who acknowledged vacancies. Questions about the situation were sent to Deka via Christia.
CBRE said: "88 Shortland & Fort is entering an exciting new phase. Occupying a prominent position overlooking the Waitematā Harbour, the building is undergoing significant common area upgrades to provide occupiers with a better connection to Britomart transport and amenity along with a modernisation of onsite services."
Deka said it was underway "with a significant upgrade of the Fort St connection to provide building occupiers a first class arrival on the Fort St entry to the building. This transformation will involve a relocation of the Fort St lobby entrance, a larger premium lobby with adjacent cafe and three new high-speed lifts. The Shortland lobby will benefit from an extensive modernisation of the hospitality offerings, arrival lounge, and collaboration third space".
Deka said it was well aware of the upcoming vacancies "and have therefore decided to refurbish to keep the premium standard and improve the building. As a high equity investor, we continually take advantage of opportunities to invest in our quality building portfolio. Regular investments in our buildings increase the quality of stay for tenants, while at the same time maintaining the value of our real estate portfolio".
Richard Goldie, of Peddle Thorp Architects, designed the tower, clad in two tones of blue high-performance glass. The twin-coloured facade was designed to accentuate a split angle, a feature which represents sails to link with Auckland's nautical past and present.
Paul Winstanley, JLL head of research and consultancy, said the new PwC Tower delivered 39,000 of ultra-premium grade stock, bringing five top tower blocks to Auckland.
Total prime office stock within Auckland Core is now around 413,400sqm.
Since the last JLL vacancy report last year, prime vacancies in premium and A-grade space rose from 4.3 per cent to 8 per cent "due to tenant reshuffling activity in response to the opening of the new PwC Tower. As at July 2020, vacancy across the five premium towers sits at 10.3 per cent. Vacancy in the balance of A Grade towers is tracked at 6.6 per cent," Winstanley said.
Auckland's five top towers are:
• 88 Quay St, ex-PwC Tower, Quay St/Lower Albert St corner, 6 per cent vacant.
• Lumley Centre, Shortland St, 40 per cent vacant.
• ANZ Centre, Albert/Swanson St, 16 per cent vacant.
• Vero Centre, Shortland St, 1 per cent vacant.
• New PwC Centre, corner Albert/Lower Albert St, 3 per cent vacant.
Winstanley cited the pandemic in the report, but only in passing, saying the re-emergence of Covid-19 saw JLL's office closed until further notice.
Precinct disputed JLL's 16 per cent vacancy figure.
"The ANZ Centre currently has a vacancy of 12 per cent which is largely driven by Chapman Tripp and Jarden relocating to the new PwC Tower at Commercial Bay," the company said.
"With an overall occupancy of 98 per cent across the Precinct portfolio we are confident there remains strong demand for prime city centre stock and we are having conversations with a number of interested parties," the company said.
'No titles have come through yet for build partners to commence the construction.'