The 22 February 2011 Canterbury earthquake had a devastating impact on Christchurch property with significant damage caused to land and buildings. Lincoln University and CBRE, a commercial real estate service provider, have been conducting research to investigate the ongoing impacts of the Canterbury earthquake on the commercial office market in Christchurch.
The broad aims of our ongoing research are to (i) examine the nature and extent of the CBD office relocation, (ii) identify the nature of the occupiers, (iii) determine occupier’s perceptions of the future: their location and space needs post the February earthquake, and the likelihood of relocating back to the CBD after the rebuild and the release of the Christchurch Recovery Plan. To address these issues, two online surveys were conducted in August 2011 and January 2012, to investigate the impacts and to determine changing perceptions. Subsequently, following the release of the 103 day Christchurch Central Recovery Plan on Monday 30th July 2012, another survey was conducted in September 2012, allowing comparisons of findings with the previous two surveys. Some key findings are that a lower percentage of office occupiers want to move into the CBD than indicated by results from the previous surveys, while the majority claim that the Recovery Plan had no effect on their relocation decisions.
As at October 2013, over 1250 buildings in the CBD have either been partially or completely demolished, including 249 heritage buildings. However, the CCDU’s CBD Blueprint with associated Central City Business and Mixed Use zones, height limits, specified precincts and the green frame, together with the commitment from government to lease around 24,000sq metres in the CBD have provided more certainty. Further, new structural systems and seismic designs, planned and actual rebuilding and refurbishments provides a greater insight into the shape and form the new city will take. Further, with the election of the new Mayor, Lianne Dalziel, in October 2013, providing fresh local government leadership a follow-up survey was conducted in December 2013/January 2014, to assess current views of office occupiers. The results from this survey further enhance the analysis of the initial three surveys.
Details about the study and a link to a Qualtrics online survey were distributed to respondents by email. A total of 559 contacts received the survey. These contacts were obtained from two sources. Firstly, 275 suburban office occupier contact details were obtained from a physical survey of office occupiers as of August 2011. Office occupiers were surveyed from a number of locations most of which are illustrated on the map below. These buildings form part of CBRE’s suburban office stock list and are typically stand-alone office buildings over 500 square metres in size. Other contacts were obtained from a database of CBD businesses from mid-2010 held by CBRE.
2. January 2014 survey of office occupiers
Following the Mayoral election in Octobr 2013, Lincoln University and CBRE carried out a follow up survey in December 2013 and January 2014 to enhance our analysis of the three previous surveys and help understand the influence of the election towards business relocation plans. To be consistent, the same methodology was adopted as in the prior surveys; the online survey was sent to 559 contacts on the 19th of December 2013 and recipients were initially given 11 days to respond to the survey. Due to the holiday period, the survey expiry date was extended to 17th January 2014. Three reminders were sent to recipients prior to the survey closing date. Over the four-week period, 104 responses were received which is a response rate of 18.6%, an increase from the previous surveyrecorded at 15.4% (97). The average occupancy size of these 104 organisations is 925 sqm.
2.1 Key Findings
- Most respondents feel that generally, the new council is better than the previous one; however as the new council and the mayor have not been long in their roles, most respondents noted their uncertainties on the new council’s ability to progress the CBD rebuild. Nevertheless, most respondents expressed that their confidence would be further enhanced once they saw more progress and results of rebuild.
- 25% of respondents who expressed a clear preference intend to move into the CBD to occupy office space. The respondents include companies that relocated from the CBD following the February earthquake, as well as companies that were existing suburban occupiers at the time of the earthquake. The average size of the organisations looking to move into the CBD is larger than those who don’t intend to move there at 1,100 sqm versus 760 sqm. In is noteworthy that an additional 13% of respondents have already moved into the CBD.
- Requirements for different building and location features influence occupier preferences. The availability of plentiful parking was ranked as the most important location/building feature. Attributes such as agglomerating with (being near to) other office based businesses and clients, and having a high level of supportive amenity beyond a café and convenience centric retail offer has been generally ranked as having a low importance. Other factors mentioned by survey respondents indicate both push factors from the CBD – concern of it being a large construction site over an extended period and pull factors to the suburbs – being comfortable with current locations.
- Of the respondents who either have plans to return to the CBD or potentially would consider moving:
- Almost half (47%; 14) could return in two years. This is longer than reported in the two previous surveys where 40% of the respondents could return to the CBD in a year (September 2012 survey) and more than half were able to return to the CBD immediately or within the next year (January 2012). This reflects the impact of increasingly longer lease terms that occupiers have become locked into over the past two years.
- Respondents indicated a business location preference based on the rebuild of their previous building(s), with their next preferred location being near the Retail Precinct (central). This is a reversal of the location preference recorded in the previous survey. Near the Convention Centre precinct (North West) remained the third preferred option for the current respondents. The Health Precinct (South West) is the least preferred location.
- With price being taken into consideration, respondents indicated a preference for Grade A (new build) – a trend that is in accordance with the findings of the previous survey. However, the results show that there is a significant increase in demand for Grade C building, from 3% at the 2012 survey to 24% now perhaps indicating that price is becoming more important relative to quality.
- Notwithstanding the above, the consistent trend over previous surveys is the preference for better quality space if respondents did not have to consider expected new rental levels; respondents still indicated a preference for higher quality space, especially A and Premium Grades, with demand for Grade C reducing if price was not a consideration.
- The above indicates that rental concerns still appear to be dominant in respondents’ office space leasing decisions. The gap between the indicative market occupancy cost based on the cost of new development and respondents’ occupancy cost expectations indicates a 17% gap for Premium Grade (average respondents’ expectation of $416 compared to economic rents for new development of $500). Results suggest that rentals for Grade B and Grade C buildings remained within the expected range of affordability.
- If occupiers could not afford the rent of their preferred quality space in the CBD, they would most likely locate outside of the CBD where it is more affordable; although preferences for this option has reduced from 58% (September 2012 survey) to just below half (49%). The figure is however still higher than recorded in the January 2012 survey (40%).
- Leasing incentives for businesses to move into CBD are highly favoured (85%). The most requested is for a free fit-out.
- Half of the respondents agreed with the importance of green ratings for buildings when choosing space. The demand is higher than recorded in the previous survey (50% vs. 42%). Further, the most preferred level of green rating is also now higher – a 5-star Green Star rating, compared to a 4-star as in the previous survey.
2.2 Respondents Profile
The charts below profile the gender, age and company role/position of survey respondents. The number of respondents is shown first, followed by a percentage of the total number of respondents.
2.2.1 Which of the following standard industrial classifications (ANZSIC) best describes your business?
Professional, scientific and technical services were by far the largest respondent group, representing 58 per cent of all respondents. This includes Lawyers, Accountants, IT Professionals and Architects. None recorded from the Administration and Support services sector. For more information about ANZSIC classifications please visit www.stats.govt.nz.
2.3 Questions on Supply and Demand
Pre-earthquakes there was around 446,000m2 of floor space in the CBD, of which 380,000m2 was occupied, with the remaining vacant space being mostly C and D-grade. Around 300,000m2 of the space has been demolished post-earthquakes. Currently there is 300,000m2 of new supply in the pipeline. Of this 221,000m2 is under construction or planned in the CBD and 79,000m2 in the suburban markets. In addition, over 55,000m2 of new suburban office space has already been completed since the earthquakes.
2.3.1 What is your perception of the amount of office space coming on stream?
Over a-quarter (28%) observed that the new space will meet both current and future demand, while the same percentage of respondents viewed that there will be an oversupply of space to meet current demand but not to meet future demand.
Following this question, there is a concern raised by respondents on affordability; they foresee a shortage of reasonably priced space available in the CBD. Another comment was in regard to an alternative option; that due to uncertainty, time and growing options of office space in suburban areas, businesses have settled down (permanently relocating) outside the CBD, hence incentives and better options might be needed to attract them back to the CBD.
2.3.2 What are your office space needs?
The majority of respondents (78%) indicate that their current office space meets their current needs and nearly two-thirds (63%) feel it is also adequate to meet future needs.
2.4 Question on What Office Occupiers Want
Respondents have ranked the importance of ten office building features, from 1, not at all important, to 5 very important. The rankings were averaged for each of the building features. An average score above 3.0 indicates it is somewhat important to tenants when they are looking for a place to occupy.
Results suggest that only four of the building features were considered important in influencing tenants’ decisions. The most important is to have plenty of parking, followed by office that is flexible for future expansion. Other important features are easily accessible space that is not on a high floor within the building, and availability of cafes and convenience shops nearby.
2.5 Questions on the Perception of the New Council
In mid-June 2013 Lianne Dalziel confirmed her candidacy as mayor at a time when serious problems developed at the Christchurch City Council over building consent issues, which led to Bob Parker withdrawing his candidacy and council’s chief executive, Tony Marryatt, losing his job. In October 2013 Dalziel won the vote as mayor.
Newly elected Mayor Dalziel, has criticised the Government for leaving locals out of the decision-making process, for a lack of transparency and for taking on heavy debt. She is committed to a more open and honest council. Dalziel wants to create a better partnership between the city council and the Government and is reported in the media as wanting to create a city that is:
“Clean, green, safe and smart . . . I want to recapture that sense of excitement.” “We need to reignite people’s imagination because we are building the newest city in the world and it is exciting….”
2.5.1 Now that the new mayor has been appointed and her vision for the city articulated, what is your perception of the new council and their leadership ability to progress the Christchurch City rebuild?
This question assesses the level of confidence of respondents with the new council’s ability to progress the rebuild. Slightly over a-third were uncertain about the council’s ability, followed by 30 per cent who had some level of confidence. Only a minority of respondents (5%) showed no confidence at all.
The most mentioned reason behind respondents’ choice is that they were yet to see “action”, rather than just hearing “words”, although they understood that it could also be too early to judge, considering the length of time Dalziel has had in the Mayoral role. Some complimented the Mayor’s approach of engaging with community and the people of Christchurch in planning the rebuild, while there was also a concern raised that the council might be influenced “by vocal groups who do not represent the silent majority”. Others feel factors such as staff incompetency, complicated situations, heavy workload and the overpowering role of CERA will likely be a detriment to the success of the new council.
2.5.2 In relation to the above question, how would you rank the new council compared to the previous council?
Despite the earlier comments, two thirds of the respondents (66%) rated the new council better than the previous one. Also, while the findings shown in the earlier chart indicate that just over a quarter of respondents (26%) had limited or no confidence with the new council, in this section it was found that an insignificant number rated the new council significantly worse (Nil) or somewhat worse(1%) than the previous council.
Questions Covering the Intention to Relocate into the CBD
Prime Minister John Key’s announcement in September 2013 that around 1,700 government employees would relocate to four new buildings around the proposed Retail Precinct in 2016, occupying about 24,000 square metres, as part of the city’s earthquake recovery has given confidence to developers in the central city. The buildings will be built to at least 100 per cent of the building code. The properties identified for the relocation of 20 public sector departments and agencies include:
- 2 Cathedral Square – former BNZ building – Partially deconstructed building
- 164 Hereford Street – former National Bank building – Vacant Site
- 112 Hereford Street – Cashel Square development – Vacant Site
- 141 Cashel Street – former Grand Chancellor Hotel site – Vacant Site
Timeframes have now been confirmed for anchor project completion as follows:
- Avon River Precinct mid 2014
- East Frame late 2015
- Convention Centre early 2017
- Metro Sports Facility early 2017
- Bus Interchange early 2017
A CERA update indicates that the value of building consents issued is over $20million per week; building activity is more than twice that of Auckland and Wellington; the infrastructure rebuild is 40% complete; 53% of the CCDU land acquisitions for the anchor projects have been concluded and not surprisingly commercial property investor confidence is at a high level (61% positive) compared to the national average of 26%.
2.5.3 With the above government announcements, mayoral election and confirmed anchor project timeframes, what are your current intentions to move into the CBD?
This question captures the relocation plans of all respondents regardless of whether or not they had relocated or planned to relocate due to the earthquake. As both groups of respondents are considered (companies that were suburban occupiers at the time of the February earthquake and former CBD occupiers that relocated after the earthquake), it gives an insight into the level of demand potential for the CBD.
Currently, a quarter (25%) of those who have a preference for either the CBD or non CBD and have not yet relocated into the CBD plan to move into the CBD while three quarters (75%) of these intend to remain outside the CBD. There were also other groups with no relocation plans; 17 respondents (16% from overall) did not have a location preference for the CBD or non CBD and 14 respondents have already moved into the CBD.
2.5.4 What are the reasons for not wanting to locate to the CBD?
Of the 55 respondents (53% of overall) that indicated their plan to remain outside the CBD, some of the reasons mentioned for this are:
- Parking – limited availability and affordability an issue;
- Traffic congestion making it hard to access the CBD and to get around;
- Suitability of the current location – e.g. convenient to staff, near supplier, client base, distributor and near the CBD;
- Unnecessary – no requirement to do so, own building outside the CBD or have settled down on current site and are contented;
- Not in favour of the CBD as feel it will become a long-term building site;
- High rental costs; and
- Limited options available to accommodate business’s needs.
2.5.5 What are your reasons for a possible move / what were your reasons when deciding to move to the CBD?
Overall, just over a quarter (26%; 27) of respondents that indicated they initially planned to relocate to the CBD, less than half (12) have indicated they have since changed their minds and will remain in the suburbs. These 12 are partially offset by three respondents who originally planned to remain outside the CBD, but now plan to move back after the rebuild. In total, 18 respondents (17%) currently plan to relocate to the CBD and some of the reasons mentioned are:
- Suitable for staff, clients, business needs and good public image;
- Rental price is affordable;
- Competitors have start moving into the CBD;
- Availability of public transport, cafes, disability access, foot traffic and retail nearby;
- Own office building in the CBD that is repairable; and
- Showing loyalty and support of the rebuild.
2.5.6 What do you see as the key impediments for office occupying firms to relocate from their present premises into the rebuilt CBD?
Some of the collective reasons stated by respondents were:
- Rents are likely to be too high;
- Traffic congestion and noise;
- Limited parking;
- Lack of a better public transport such as a commuter train service;
- Have to be bonded with a long term lease agreement;
- Are bonded with current lease agreement (in suburbans);
- Constant rebuilding works, currently messy and not appealing;
- Business is established in the new location (suburban), so no reason to relocate;
- Reasonable or cheaper rent and sufficient facilities in current location;
- Staff resistance and trauma with earthquakes and ongoing seismic activity;
- Business interruptions due to relocation process and the switching cost;
- Insurance delays; and
- Lack of availability for small office space.
2.5.7 What do you think would need to be done to overcome these impediments?
In relation to the previous question, respondents have suggested some ways to overcome the barriers that provide guidance to their needs:
- Clear, systematic and timely (faster) progress, so the results of the rebuild are evident. This includes 24/7 operation instead of the normal 8 hours to work on the rebuild;
- Better transport such as light rail services;
- Better parking facilities in terms of availability, safe for staff, and inexpensive;
- Less traffic – so it is convenient and safe for pedestrians and cyclists;
- Flexibility by landlords and cheaper rentals in CBD;
- Availability of lower grade office space;
- Financial incentives to encourage a move back such as cheaper/ subsidised initial rent, rent-free period or free fit-out, and assistance to exit existing lease agreement (suburban office) or with relocation expenses;
- Better infrastructure – roads, foot paths and public spaces;
- Halt, or put a moratorium on, the suburban office development; and
- Less intervention by government and allow the market to dictate outcomes. In contrast, some respondents encouraged interventions by government to deal with insurance delays and landlords taking advantage for their own interests.
2.5.8 Do you think you would change your intentions and would be willing to locate in the CBD if these impediments were overcome?
Regardless of the suggestions made to overcome the impediments, the majority of respondents (80%; 43) who had no current plan to move to CBD responded that any such efforts will not cause them to change their mind. This indicates that there are other more dominating factors that influenced their relocation decisions, as outlined in the responses in Section 2.5.4.
2.6 Questions Answered by those Who Intend to Move into the CBD
The earlier section determined that 17% (18) of respondents intend to move into the CBD. The following questions were answered by these respondents. In addition, 17 respondents who were indecisive (don’t have a location preference) were also included in the analysis due to the possibility that they might move into the CBD.
2.6.1 When are you able to move to the CBD?
Responses indicated that 47% (14) of respondents were able to return to the CBD within the next two years. Only 23% (7) could return within the next year (compared to 40% in the previous survey who could) indicating a longer time period is now needed before moving to the CBD. There is no linear pattern exhibited in the following chart, with the least number of respondents (3) could only return after 3 years.
Further analysis revealed that the above responses are mostly dependent (35%) on when the proposed space in the CBD is ready. While the ranking of this has not changed from the previous survey, some agreed (17%) that the nature of their business would also influence their decisions. Additional comments indicate that the availability and suitability of office space in the CBD is a determining factor on the timing of a move.
2.7 Questions on New and Repaired Buildings
A number of refurbished and new projects have been or are nearing completion or are in the final planning stages providing an insight into the shape and form the new city will take. Some examples of these include the following:
- 145 Victoria Street
- 106 Victoria Street
- 131 Victoria Street
- 76 Victoria Street
- 83 Victoria Street
- 134 Victoria Street
- 82 Gloucester Street
- 278 – 293 Durham Street
2.7.1 How attractive are the various CBD precincts to you as office location options?
Respondents have ranked their location preference, from 1, highly unattractive, to 5, very attractive. The rankings were averaged for each of the CBD precincts. An average score above 3.0 indicates it is somewhat attractive. The location of, and rebuild of their previous buildings is in the top rank, followed by near the Retail Precinct. This was in reverse order in the previous survey, signifying the tendency of business owners to now move back to where they were previously. The third preferred location is to be near the Convention Centre; the same as in the previous survey. Near the Health Precinct used to be one of the preferred locations; however the current survey revealed that this is now the least preferred location.
Respondents provided reasons for their ranking, as follows:
- Location that is not too central to avoid high rental and density;
- Accessibility – ease of access and parking;
- Staff requirements – preference on location and amenities for staff such as cafes and bars, and retail;
- Near recreational areas, for example Avon River and park. One respondent specifically mentioned the northern section of city for its closeness to new cultural activity;
- Near like-minded businesses;
- Location where there is suitable quality and quantity of buildings available. Also not blocked out by tall buildings;
- Nature of the business – near places that accommodate business needs such as hospital, council and court; and
- Near clients and tourist area.
2.8 Questions on Leasing Activity / Rents
2.8.1 What quality of building would you require in the CBD taking price into account?
In this question, respondents were asked which of the following building grades they would require taking into account rental price:
- Premium Grade – New building. Constructed to the highest quality, prestige lobby, high architectural merit, latest generation building services, onsite undercover parking. The total occupancy cost (rent plus outgoings) could be in the region of $501-$550 per sq. m.
- Grade A – New building. Good quality construction including many but not all Premium features. The total occupancy cost (rent plus outgoings) could be in the region of $451-$500 per sq. m.
- Grade B – Existing building of above average quality with some but not all Grade A features and to a lower standard or a lower quality and specification new building. The total occupancy cost (rent plus outgoings) could be in the region of $325-$450 per sq. m.
- Grade C – Existing building of lower quality air conditioned space. The total occupancy cost (rent plus outgoings) could be anything below $325 per sq. m.
Similar to the results of the previous survey, respondents in the current survey (n=42) indicated a preference for Grade A (45%; 19) and Grade B (26%; 11) buildings, although the percentages have reduced from the previous survey of 59% (Grade A) and 34% (Grade B). Top quality Premium Grade building was the least preferred. Compared to the previous survey, the preference is significantly higher for Grade C, from 3% to 24%. The results are included in the chart below under section 2.8.2.
2.8.2 Notwithstanding your response to the previous question, the quality you would prefer is:
If respondents did not have to consider price, results indicate that they prefer to locate into a higher grade building; while results were similar between the two scenarios for Grade A and Grade B, the preference for a Premium Grade building increased from 5% to 21%. On the other hand, preference for the lowest grade, Grade C, reduced significantly from 24% to 10%, suggesting a strong influence of price in office building grade preferences.
Regardless of the possible rental price guidelines in section 2.8.1, respondents were also asked how much they were prepared to pay for each quality grade (gross rental per sq. m). The following chart illustrates the difference between tenants’ willingness to pay and the indicative rents that are likely to be required for such buildings from landlords. We have taken an average of the respondents’ price expectations.
The chart above illustrates that for existing buildings (Grade B and C) tenants are willing to pay prevailing market rates. However, for new Premium Grade and Grade A buildings, there is a gap between expectations. For Premium Grade, occupiers’ price expectation are $417; although this is higher than what had been reported in the previous survey ($376), the current expectation is 17% below the lower end of the likely indicative rental range. For Grade A, the gap between price expectations and the indicative rent range is 12%, a similar percentage (13%) recorded in the previous report.
This rental gap may negatively impact on the demand for new built space when the rebuild gets under way. The focus however is on Premium Grade as the gap is bigger compared to others and also to the results from the previous survey recorded at 12%. Nevertheless, the bigger gap could be associated with higher indicative rental ranges for each building determined in the current research compared to the previous one, for example, indicative rental range for Premium grade was $425-$500 which had been revised to $501-$550 per sq. m.
Reasons respondents provided for their building quality preference are:
- Suitability of the building – for clients and for public image;
- Staff safety and expectations;
- Affordability – reasonable rentals within budget;
- Best value for money; and
- Generally comfortable, functional and attractive.
2.8.3 Do you think that leasing incentives will be needed to attract tenants to the CBD at the indicated rentals?
The majority of respondents (76%; 34) indicated leasing incentives are needed to attract tenants into the CBD while 16% were unsure and 9% thought they are not needed. Most respondents that agreed leasing incentives were needed, preferred fit-out provisions or a financial contribution to the fit-out (85%, 29), with rent free periods (9%; 3) and cash incentives (6%; 2) least favoured forms of incentives.
2.8.4 If office space cannot be rented for the levels willing to be paid above, what will you do?
No respondents selected closing the business altogether or relocating to another city, suggesting these would not be realistic options for their business. Almost half of the respondents (49%; 22) indicated they would locate outside of the CBD where it is more affordable (versus 58% in the previous survey that would locate outside the CBD). The less preferred option to occupy lower quality CBD space which is affordable has increased from 9% in the previous survey to 13%, and the option to accept the higher rental reduced from 15% in the previous survey to 9%, suggesting increasing price sensitivity. Other responses include respondents saying that they would either remain at their present location or delay their relocation decision for a better option that may arise due to a potential over-supply of office space in the CBD.
2.9 Questions in Relation to Sustainable City Development
One of the visions for the rebuild is to develop a sustainable city. As part of this the Green Building Council of NZ has developed a green building assessment tool for Christchurch: Building a Sustainable Environment (BASE) that is a simple, introductory-level green building assessment for new office, retail and mixed use buildings. Quantity surveyors, Davis Langdon, analysed cost impacts for the design and construction to BASE standards. For a small (1500m2) building the capital cost impact was estimated at 1.3% and for a medium sized (3750m2) building it was assessed at 0.5%. BASE will not be included in the revised Christchurch District Plan, so remains a voluntary tool only.
2.9.1 When choosing a building to locate to, is the green rating of the building important to you?
Half of the respondents (24; 50%) agreed to the importance of a green rated building, an increase from the 42% reported in the previous survey.
2.9.2 What level of green rating would you prefer, given that the higher the level the more rent is likely to be charged for the space?
This question refers to the respondents’ desire for locating to a green rated building and applied only to the 24 respondents who agreed on the importance of green rated buildings in their location selections. The largest group (41%) preferred the 5-star Green star (NZ Excellence) rating, up from just 11% (least preferred) recorded in the previous survey, and indicating a higher green building rating is now desired. However, the preference does not include the highest rating 6-star Green star (World Leadership) which is least preferred in the current survey.
2.10 Other Comments
Finally, survey respondents were asked to state any additional comments they may have in regards to the survey. The following is a summary of the comments:
- The speed of rebuild is a concern for some (this is consistent with comments made in the previous survey). Better time management and resources should be in place.
- More understanding on issues of transport and parking is needed as it influences the decisions to move back into the CBD.
- There is a concern on traffic congestion in the city. Better planning considering all influential factors and implementation are needed to control traffic congestion.
- Flexibility from the local authority is needed especially when businesses have been struggling to operate again. It was pointed out that some successful business operations are now being intervened with and controlled by local authorities; some restrictions were enforced based on official policy which makes it harder for businesses, rather than being helpful.
Findings from this follow up survey provide further insights into some of the important issues in relation to the impacts of the Canterbury earthquake on Christchurch office occupiers. While the new mayor has only just been elected, a few general questions on the new council were asked to assess levels of confidence among respondents on the council’s ability to progress the Christchurch city rebuild. Findings reveal that the majority view the new council as better than the previous one. However, in regard to the confidence in their leadership ability with the rebuild, most were uncertain about their ability. Confidence can be enhanced once business occupiers can see successful results of the rebuild.
In line with the findings from the previous survey, demand for locating within the CBD is lower than demand for suburban locations. Some reasons given by respondents who do not want to move are the expected high rentals, parking issues, traffic congestion coupled with them having already established businesses and having adapted to a new environment outside CBD. Some of the key impediments to relocating from present premises into a rebuilt CBD are the disturbance of constant construction works that might be long lasting, business disruptions when moving back , and issues with current (in suburban) and future (in CBD) lease agreements. Respondents indicated that demand for a CBD location may be higher if there were better parking, transport, lower rentals or more low-grade office space available, and the provision of incentives to move into the CBD. Also suggested is to expedite the rebuild process by better planning.
Again, in agreement to the previous survey, respondents still consider that higher grade and new buildings are preferred; Grade A quality office building is the most preferred, while more demand than previously was recorded for Premium Grade. However, when taking into account the rental price, occupiers lower their quality expectations; while Grade A is still the highest preference, Grade C office building is becoming popular. Rental concerns still appear to be dominant in respondents’ decisions. The gap analysis between an indicative rental range and respondents’ expectations on rents indicate similar results to the previous survey except for Premium grade. The gap for Premium grade is wider, signifying lesser willingness to pay the rental required by development costs for this grade of space. A suggestion to overcome this is to offer leasing incentives, specifically those relating to fit out provision. Should rental price issues appear unresolved, most respondents would opt to locate outside the CBD where rental is more affordable.
On a positive note from a sustainability perspective, demand is increasing for green rated buildings. There is also more demand for a higher Green star rating; while 4-star Green star was the most appealing in our August 2012 survey, current findings shows 5-star Green star is now in greater demand.