Language school closure 'warning' to landlords

By ANNE GIBSON


Vacancy rates in fringe-city Auckland office blocks could rise due to the slump in foreign language schooling, says a real estate consultant.

Colliers International corporate services director Alan McMahon, who is also the Property Council's chairman of research, said the collapse of one of Auckland's biggest English language schools could send a warning to commercial landlords who have rented much of the city's fringe office space to the businesses.

The Modern Age Institute of Learning shut its doors last week.

McMahon said secondary fringe-city office space vacancies could rise from 12 per cent to 20 per cent.

He told a property investment seminar in July that foreign students were crucial to the health of Auckland's property industry.

"If it wasn't for the education sector, there would be a lot more empty space.

"I've heard of a 30 per cent decline in the industry. It doesn't mean the whole industry will disappear but that there will be a normalisation and some buildings will become partially empty."

Modern Age leased six buildings: level two at 100 Mayoral Dr in central Auckland, level four at 142 Broadway in Newmarket, levels one and two at 161 Hobson St, level two at 2 Devonport Rd in Tauranga, level eight at 15 Dixon St in Wellington and space at 122 Gloucester St in Christchurch.

McMahon said some reduction in the education sector's occupation of offices could be good long-term because owners might have to refurbish their buildings, which would increase the value.

Leasing secondary office space to business tenants would not be difficult in the present healthy market, he said.

Bayleys research manager Gerald Rundle wrote last month that education "has basically saved the Auckland City property market. It's now the biggest occupier of office space in the CBD, ahead of such traditional heavyweights as the legal and banking professions.

"It has soaked up vacant office space at a phenomenal rate - more than 120,000sq m in total since 1996. A substantial amount of redundant office space has also been removed by apartment developments catering primarily for students.

"Without these influences, Bayleys Research estimates we would be staring down the barrel of a CBD office vacancy rate of 25 to 30 per cent instead of the current reasonably healthy 10.1 per cent rate."

But Rundle noted some changes: "The growth of the education sector has slowed, from absorbing more than 30,000sq m of additional office space last year to 7500sq m in the first six months of this year."

Neil Prentice, of Bayleys, said his firm would repeat its survey of the amount of office space taken by the education sector towards the end of the year.