93% of Wellington CBD considered earthquake-strong
93% of Wellington CBD considered earthquake-strong
8 October 2013
Wellington, 8 October 2013 - CBRE New Zealand has released new research offering an overview of seismic issues and the current spread of structural NBS ratings across the Wellington CBD property market, with 199 buildings and almost 1.4 million square meters of space surveyed.
Key findings show that only 7% of Wellington CBD’s Net Lettable Area (NLA) has an NBS rating of below 33%, and that lower quality buildings dominate earthquake prone stock in the capital.
The information was collected prior to the first major seismic activity in the capital in July 2013, but is able to offer useful advice on what effect the recent activity is likely to have on the market.
The research highlights that low quality properties dominate the earthquake prone stock in Wellington, with Senior Analyst for CBRE Research & Consulting, Iain Shaw, noting that the majority of office stock with an NBS rating of below 67% is found in Grades C and D.
Shaw adds that Grade B and higher seems to be faring well with regards to NBS: “If we take out of consideration the Wellington City Council buildings on Wakefield St, there are no Grade B earthquake prone buildings. Furthermore, those buildings are going to be strengthened, which means an increase in vacancy/redundancy will be avoided in this instance – so we can expect Grade B buildings in Wellington to be attractive premises for tenants and investors alike.”
Shaw adds that Prime has around 284,000sqm of stock with greater than 80% of NBS, and almost 26,000sqm of stock with ratings of 67% - 80%, so the higher quality buildings are in good shape with regards to seismic strength, especially once the current project to strengthen the Majestic Centre to 100% of structural NBS is completed.
Shaw says that many larger organisations now operate under the increasing presence of director liabilities, which means that 67% is now the minimum consideration, with most corporate occupiers preferring an NBS rating of 80% or above.
“It can be tempting for people to think that all the CBD buildings are earthquake prone, but the data shows that the picture is nowhere near as bad as some might assume. 44% of stock has an NBS rating of greater than 80% and 36% of stock is rated at between 67% - 80% of NBS, which to most people is perfectly acceptable.”
Shaw says that while it is too early to draw definite conclusions from the seismic events in Wellington over July and August, a number of possible consequences have become apparent.
“Our market intelligence highlighted a growing trend that has emerged since the seismic activity over the past two months, which shows the growing importance for occupiers to have a business continuity plan to minimise disruption caused by seismic events. It suggests that occupiers with a robust business continuity plan tended to fare better in the aftermath, allowing them to minimise disruption by quickly and efficiently organising alternative workspace for staff where required – no mean feat, given the limited supply of vacant corporate suitable stock available in the CBD.”
“Additionally, in the past there was a tendency for corporates looking to centralise staff within one CBD location – but after the recent seismic activity, we may see that desire reduce because of the effects on business continuity if the HQ building is damaged. The old adage of not putting all your eggs in one basket comes to mind, and it’s worth considering when structuring your property and planning business operations for the future.”
Shaw adds that there is likely to be further interest in the availability of large buildings with seismic scores deemed acceptable to corporate occupiers.
“Bigger buildings with strong seismic ratings will be held even more closely by existing occupiers now. The same spaces will be increasingly sought out by those with the capital to make the move to a more expensive but seismically secure location, because both the company and the staff will want reassurances of their building’s strength.
“The market should also expect to see an increase in corporate occupiers looking to bring forward their planned relocations to buildings with acceptable ratings. A few months ago they might have been willing to put a relocation off by a few years, but recent activity will see those plans kicked into action in the coming months.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue).
The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide.
CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.