Commercial vacancy levels hit 15% Posted 2009, 12 May Don’t blame the recession for all those empty commercial properties you see. The recession is merely a short-term trend with a severe short-term impact on commercial property vacancy rates. But the digital age is a longer term trend with an even more profound impact on vacancy rates. We live in revolutionary times when it comes to leasing property. On the one hand, the markets are becoming increasing complex. On the other hand, if you reframe complexity as ‘diversity’ that offers new opportunities, the market takes on a new dynamic. I’ve often talked about the need to think outside the square, and in fact business leaders and trend watchers are all saying with one voice that it will be innovation that lifts the world from the economic shockwaves of the past eighteen months. I believe we are in an era when we must totally rethink the way we approach the physical spaces we occupy as a business. It’s interesting to note that some statistics were published recently about vacancy levels in New Zealand’s commercial property market. The agency’s figures suggested a vacancy level of 7.5% in Auckland. I can tell you that figure is grossly understated. I believe the real figure is probably closer to 15%. The difference is accounted for by vacant spaces that have tenancy agreements in place but are… Available by way of sub-lease. Part of a larger space leased by a company that has downsized but for whatever reason is not able to sub-lease the vacant portion. This brings me to the point of this posting and the impacts on space needs. Many businesses are downsizing their space needs for reasons ranging from hiring fewer staff because of the economic slowdown, through to the number of people hot-desking, working in the field, and from home. And to add to that, the revolution of online business. It is impacting us in all directions; from online shopping and ordering of goods and services, to banking, to telecommuting – the ability to work online from a variety of locations. If you stop and think of the compounding impact of the volumes of business we now do online, all types of commercial property are affected; retail, warehousing, office space, manufacturing and industry. And we hear daily about the outsourcing overseas of everything from call centres to manufacturing. In our globalised online world, the physical space needs of a business are truly being revolutionised. Some creative thinking and strategising to adjust the space needs of a business, given this new environment, can have a significant impact on your bottom line.
I suggest you watch the webcast of the interview I did on TVNZ’s business programme June 5: Renters’ market for office space. In it I explained why I think vacancy levels are higher than the level quoted by some agencies at the time (7 to 8%). Subsequently, many agencies are now going public and acknowledging that subleases should also be taken into account, i.e. agreeing that their previously published vacancy levels were too low to be believable. The main thing to remember is that there are pockets (even individual streets) of high level vacancy and other areas where there is low vacancy. A blog commentary like mine, and indeed the big newspapers, have to take a broader view to be meaningful. If you would like to discuss this subject in more depth, please feel free to give me a call. Log in to Reply
