When the government finally announced they would support the CRL – but starting in 2020 – they listed two targets that would need to be on track to being met to bring construction forward.
- Rail Patronage to double to 20 million
- CBD employment to increase by 25%
We’ve written about both of these a number of times before. I personally think it’s quite possible that we will reach the 20 million patronage target early, especially if we can continue the current growth of over 12% per annum. The harder target – and dodgier one – is to increase CBD employment by 25%. It’s more dodgy as it appears to be being used as an indicator of travel demand but there are many other factors that might increase demand for rail e.g. increases in parking prices and the number of students.
An article in the Herald on Tuesday highlights just how hard the employment growth number will be.
Auckland businesses are squeezed for office space, and the central city is experiencing its most critical shortages of commercial real estate on record.
So rents could be about to shoot up fast.
Chris Dibble, Colliers International’s national research manager, said latest analysis of vacancy rates surprised him because it showed that an area less than the size of a soccer field was available to lease.
“We knew it was going to be low, but not this low. The prime sector for premium and A-grade vacancy rates in Auckland CBD is just 1.4 per cent, beating our expectations of 2 per cent. It was 4.7 per cent six months ago and the 20-year average is 8.2 per cent,” he found.
“The vacant space aggregates to just 6116sq m, less than a soccer field and unprecedented in our records which began 20 years ago,” Dibble said.
“Auckland CBD property houses some of the most productive businesses in New Zealand and with little space available for expansion, we are stalling the potential growth of the country at a critical time in the cycle.
“In a market that needs to attract quality staff through quality environments, the lack of available space and developments nearing completion means we will stumble just as we were making headwinds in what has been a tough slog for many. There are only 11 prime buildings with vacant space available. Only eight buildings can accommodate more than 20 staff (currently 11 per cent of the overall CBD market).
“Only seven are able to accommodate less than 20 staff. Tenants who haven’t found suitable accommodation will have to forgo quality or wait until early 2016 for a slight reprieve from spec builds such as Mansons TCLM’s development or Goodman Group.
In effect CBD job growth – which has been strong in the last few years – is going to dry up simply because there’s not much office space left and there’s not a huge amount to come on stream any time soon. Office space will get a bit of a bump from the Precinct Properties redevelopment of the Downtown Mall site but that won’t come on stream till 2019. That development though will see at least the first part of the CRL constructed as it absolutely has to happen at the same time as the redevelopment seeing as it passes through the basement.