Corporate takeover of city's suburbs

MARTIN VAN BEYNEN

Last updated 05:00 14/05/2011

 

Go west, young man. That could be the advice to anybody wanting to find life in Christchurch after the February earthquake.

The west includes places such as Riccarton, Addington, Hornby, Sockburn and Bishopdale, which are buzzing with traffic and people.

They are talked about as the new business hubs of Christchurch, but in reality they have been developing as retail, light industrial and commercial office centres for many years.

Since the quakes, any high-quality spare capacity has been gobbled up by the displaced occupants of the paralysed central business district and surrounds.

As usual, the best barometers are the cafes and restaurants.

Carl Sara, who owns the Crafted Coffee Company on the corner of Blenheim Rd and Dalgety St in Riccarton, is riding a wave of increased population and more traffic.

"There's no such thing as a boardroom any more – it's an office for 10 people," he says.

Trade got a boost after the September earthquake but then flattened out. After February, "we've been really busy right through".

Hornby is undergoing a transformation.

The managing director of commercial lease specialists Knight Frank, Layne Harwood, says he recently had six or seven cash buyers competing for a Robert Harris franchise in the Hornby mall.

The five-storey Clock Tower building in Main South Rd is being revamped, and a busy Coffee Culture outlet is ensconced on the ground floor.

Clock Tower developer Brent Jones says Hornby was already humming before the influx from the February quake because of the population increases in Rolleston, Prebbleton and Lincoln.

About three floors of the building are more or less spoken for and interest so far is "comfortable", he says.

The Hazeldean Business Park in Lincoln Rd is the poster boy for the redevelopment of Addington, which has new office complexes in Lincoln and Wrights roads, Show Pl and Princess St.

The low-rise buildings are surrounded by spacious car parks, and the areas have their own creches and cafes.

Law firm Cavell Leitch has moved to the park, and its reception area, with its concrete floor and makeshift table, reflects the speed of the shift.

Sharebroker Forsyth Barr has moved to the first floor of one of the other Hazeldean complexes, as have the Ministry of Health and an insurance broker.

The relocation of law firms and accountancy practices illustrates the flight to the suburbs.

Law firm Lane Neave is now in the Russley Business Park in Harewood and Walker Davey Accountants has moved to the Airport Business Park in Russley Rd.

Law firm Duncan Cotterill has relocated to Sir William Pickering Dr in Burnside, and another law firm, Wynn Williams, is now in Marshland Rd.

The same trend is evident in light industry.

Shalimar Knitwear, which makes high-quality garments mainly for the rural sector, reopened last week in Vanadium Pl in Addington.

Managing director John Stevens says he has signed a two-year lease and will be thinking hard about relocating again, after the shift cost about $70,000.

He likes the new area, and its high traffic presents an opportunity for a factory shop.

The bustle extends to the rental and residential market.

Any home coming up for rent in the west and northwest is snapped up, says Face Property Management general manager Emma Lindsay.

"People are renting purely on what they believe are safe locations and emotion, even if the eastern suburbs have plenty of undamaged rentals available," she says.

Harcourts business development manager Jim Davis says sales in the western and northwest suburbs are robust, but he is not writing off the eastern suburbs.

"Our Ferrymead office sold five properties in April," he says.

"The increased interest in the west is short-term, and it will swing back as things stabilise and the market returns to normality.

As businesses and their staff adjust to the new realities and become comfortable in their new environment, some big questions arise. Will they go back to the central city? And if they do, what do they want?

Julian Clarke, managing partner of Cavell Leitch, which formerly had three floors in the Clarendon Tower in Oxford Tce, says the firm has signed a six-year lease in the Hazeldean complex, but he cautions against an assumption the firm will not return to the central city.

"I would be very disappointed if firms did not go back, especially if the central city is made attractive," he says.

"People will go back if its attractive enough."

A lease does not mean a business is tied to a location, he says, as other tenants can be found, allowing a firm to move within its lease term.

The fact that other law firms are now so spread out makes business much more difficult and clients no longer "pop in".

"Life enjoyment" has been diminished by leaving the city centre, with its bars and shops, he says.

Forsyth Barr office manager Garry Moore says the firm's shift to Hazeldean is as permanent "as things can be in a business environment".

He commends the park as being attractive, modern, handy to the central business district and low-rise, yet he cannot see any reason why businesses would not go back to the inner city if it is functioning well.

"However, city planners will have to get their head around the fact people will get comfortable and be reluctant to leave. The longer the rebuild goes on, the more entrenched people will become."

He says transport to the growth areas is the main issue. He believes the CBD is in the wrong place and should be spread along the transport corridor of the railway tracks.

Although landlords face difficult decisions as they contend with falling land value and less opportunity to maximise returns because buildings will be low-rise, many are confident the city will recover its tenant base.

Jones is positive because he believes the large number of businesses in temporary buildings will want to go back into the inner city.

"The danger is that only half or two-thirds of tenants will go back into town, and the longer the rebuild, the greater the risk they will not return," he says.

In any event, some tough decisions lie ahead for landlords and developers.

Shaun Stockman, whose company, KPI Rothschild Property Group, specialises in "reinventing" historic buildings attractive to high-end, smaller-scale tenants, says the fundamental position that a city starts in the centre and spreads out has not changed.

The need for law firms to be near the courts and for the financial sector to congregate remains, he says.

Banks such as Westpac might have new headquarters in Addington but will still need a presence in town.

Firms such as his cannot afford the luxury of waiting 10 years for business to shift back into the city, and he expects to be building low-rise buildings with something special to entice tenants.

"They have got to be fabulous," he says. "I have found out over the years that if you build what people want, they will come. It's a punt, but it has always worked."

Angus McFarlane, the managing director of the one of the city's largest property companies, says larger companies and tenants are adamant they want to return to the CBD because "they need to be around each other".

Even companies that have signed six or eight-year leases plan to return.

The drift away from the CBD has being going on for years, he says, and the quake handed many of the smaller tenants in places such as Lichfield and Tuam streets the excuse to leave.

"We won't be seeing them come back," he says. "We speak with them and they think [their new locations] are marvellous. On the other side, we are seeing very strong inquiry for professional offices."

Prospective tenants wanted low-rise buildings – no more than eight storeys – with safety being one of the prime factors.

"The first question is always about the stairs."

He says rent has been relegated to second or third on the ranking of considerations, with the number of stairwells being more important.

He is encouraged by the response to proposals for three buildings his group plans to build in the CBD.

A six-level building in Worcester St has been consented and will go to the market in about three weeks. It will not be finished for at least 2 1/2 years.

The largest of the three is an eight-level (two parking levels) complex in Armagh St on the former Munns site, which could provide 14,500 square metres of office space.

The buildings were on the drawing board before the quake but are now clearly needed, he says.

He predicts construction costs will rise by about 8 per cent and rents will increase between 10 and 15 per cent.

The biggest risk, he says, is businesses going broke when they run out of insurance and before crucial decisions are made.

The future health of the city is in the numbers, says Mark Macauley, of CB Richard Ellis. He says the city has lost about 300,000 square metres of office space, but the new areas can provide only about 20,000sqm to 30,000sqm.

"There was not that much available and it was snapped up in a few days. Landlords are not necessarily increasing rents but do not have to offer incentives either."

Many tenants had squeezed themselves into half of the space they had previously and would move when the time was right.

People should not write off the CBD yet, he says.

"We need to remember there is still a lot of undamaged infrastructure in the CBD."

His firm has moved to offices on the edge of the cordon in Tuam St to be close to the CBD, and he has just leased a building in Walker St.

Harwood says his company leased a lot of space in the suburbs after the quake, mainly on short to medium terms.

About half of the tenants are content with their premises, he says, and the other half are keen to return to the CBD. Those unhappy with their new location are finding the lack of amenities for staff and insufficient parking difficult.

Four-year terms are popular because many businesses are allowing that time for space to become available in the CBD, he says.

The future of the CBD, then, looks reasonably secure. Relocated businesses adjusting to life in suburban business parks are finding the worth of what they once took for granted.

Many can't wait to go back to the city, but they will want to go back to something better.

The CBD will need to become the next hot location in town.

- The Press