What happens when big corporations vacate old premises? Posted 2010, 16 March One of the key impacts on the currently flooded commercial property market is the number of large corporate tenants moving to new buildings. In Auckland, there’s a growing list of large banks, insurance companies, management consultants and engineering firms moving to bigger, better, brighter and greener premises. Banking The ANZ, ASB and Westpac banks have, or soon will, move to highly rated green-star buildings around Auckland’s up and coming waterfront precinct. Insurance Likewise, ING and IAG in the insurance industry have moved downtown, and on the North Shore we’ve seen Sovereign move from Takapuna’s retail strip to a state-of-the-art building in the Smales Farm technology office park. Telecom Telecom is moving from several buildings around central Auckland to one large complex overlooking Victoria Park. Others heading towards the cooler environs of downtown include the large engineering practice SKM, which has relocated to the new office park built over the ex-rugby league grounds at Carlaw Park. When the boom was booming loudest I am often asked why these large organisations are moving when the global economy is still in turmoil. Simply, the decisions to move were made several years ago when the boom was booming loudest. I was told last week by an executive of one of these organisations that if they had to make the same decision today, they wouldn’t be moving. Anatomy of oversupply These large corporations leave a large gap behind them when they move to new premises. But at the same time, as anchor tenants in new buildings, they don’t fill every floor of the new complex. So we have vacancies in the new buildings they move to, and bigger vacancies in the buildings they vacate. The result is an inevitable oversupply. Pitfalls While tenants seeking new commercial space may appear to be spoilt for choice, there are some pitfalls for those taking up space in the buildings recently vacated by the large corporates. For a start, prospective tenants will most often be smaller operations than the large banks, insurance companies and consultancies. As they require a smaller area than the bigger companies, they don’t hold quite so many bargaining chips. Likewise, they don’t have the grunt of well-organised and practiced property departments behind them like the larger firms. Tough landlords It is critically important to have the support of professional advice because the professional landlords are tough negotiators used to dealing with tough opposition from the bigger firms. Tough negotiators It’s an area that we at Parallel Directions specialise in, so don’t hesitate to give us a call if you are considering taking up space in one of the vacated buildings.
