Hard times force landlords to be flexible

A bleak outlook on city-centre rents and vacancies has prompted Goldman Sachs JBWere to take a dimmer view of the commercial real estate market.

Analysts Buffy Gill and Marcus Curley said the latest report from consultants Jones Lang LaSalle (JLL) persuaded them to review their outlook for the listed real estate stocks - although they have retained a hold recommendation on most.

JLL's real estate intelligence service report for the six months to June predicted rising CBD vacancies in Auckland and Wellington and continuing pressure on rental rates.

Auckland's premium CBD office vacancies are picked to rise from 0.9 per cent vacancy to 2.6 per cent vacancy by next December and Wellington's from 1.3 per cent to 2.2 per cent.

Rents are falling in both centres and have declined by 9 per cent in Auckland in the last six months. The market has shifted towards the tenants and they have the opportunity to negotiate on their terms now, the Goldman report noted. Landlords are being forced to be more flexible and rent reductions were being given along with rent-free periods and leasing incentives.

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Posted: 29 Jul 2009

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