Mahvash Ikram
An overhaul of the way earthquake-prone buildings are rated is unlikely to bring relief for office property owners unless companies also alter their internal workplace safety guidance, an expert in the field says.
The government has signalled a shift away from the current percentage-based New Building Standard (NBS) model towards a system that focuses on dealing with buildings that pose the greatest to human life.
Areas of low seismic risk, including Auckland and Northland, have been exempted from the regime entirely.
Bayleys Real Estate’s national director of occupier strategy Steve Rendall told The Law Association’s Property Law Conference last week that large corporate occupiers are unlikely to respond purely to the statutory reclassification.
He said many have internal risk settings that boards have adopted to meet their duties under the Health & Safety at Work Act which prevent them occupying buildings below 70% of the New Building Standard (NBS).
Unless workplace safety guidance moves in step with the reform to earthquake-prone building classification, Rendall suggested, directors may remain cautious, meaning leasing decisions could continue to be driven by internal risk thresholds, rather than the new framework.
Some Auckland building owners were already treating the proposed changes as reducing the relevance of detailed seismic assessments, Rendall said, while tenants remained less confident and continued to seek updated engineering advice before committing to space.
Rendall questioned whether reform would ultimately deliver greater clarity. “I’m not sure that we’re going to get less or more certainty out of all this,” he said.
Fire safety and occupancy pressures
Beyond seismic reform, Rendall also highlighted potential compliance pressure on tenants from the education sector who occupy commercial office space. He referred to polytechnics, universities, schools and English language providers that had seen demand rebound in the past 12 months. Unlike typical office tenants, he said these operators often run at significantly higher occupancy densities.
Standard office fire safety assumptions typically sit at around one person per eight to 10 square metres. By contrast, some education providers were operating at densities closer to one person per five to six square metres, which he warned was not a good ratio. “If there’s a fire alarm, everyone goes down the stairs and there [could be] a crash,” he said.
While he did not allege widespread non-compliance, Rendall said he was unsure how some operators were managing those constraints. “I get the sense this isn’t well understood at all in the office occupancy market,” he said. The issue, he suggested, raises questions about whether permitted occupancy levels align with actual use in some commercial buildings.
Office markets around the country
Rendall outlined diverging regional conditions across New Zealand’s main office markets. He said Auckland’s premium buildings were effectively full, with vacancy rates below 2.0% in top-tier assets. In that segment, rents were “moving up, without question”. The city continued to see a “real flight to quality”.
Wellington, by contrast, was “a very soft market”, with higher and rising vacancy rates. Christchurch had experienced comparatively more development activity than Auckland and Wellington.
Development remained challenging across the main centres, with institutional capital having “moved away from office, quite markedly” post-Covid. New office projects typically required pre-commitments of around 50% of net lettable area, which was “challenging to get from occupants”, he added.
Meanwhile when it came to rent reviews, fixed increases that commonly sat at around 3.0% per annum in Auckland were beginning to edge higher in premium stock, with some institutional landlords issuing terms at 4.0%, he said. Wellington remained closer to the 2.5% to 3.0% range.
Traditional incentives of one to two months’ rent per year of lease term broadly remained, but there had been a “real move towards turnkey fit outs from landlords” over the past two years. Fit-outs could cost between $1500 and $2500 per square metre.
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