Here we are 6 weeks later and my commercial property world still seems centred on the Kaikoura shakes, every second conversation seems to relate to earthquake ratings or what is happening in what damaged building etc. I like to think that I was unshaken by these events, inconvenienced yes, I lost sleep and a carpark. I did get swept up in a frenzy of anxiety which followed and got extremely grumpy around being displaced suddenly by the BNZ who leased all the space in the building my office was in. I discovered how much rubbish I hang onto in my office space and managed to clear much of it, I think I only carried one old phone book to my new office. I was the recipient of some tremendous kindness from several people who stepped up to help me move up to The Terrace and I have discovered this new fangled thing called VOIP which is extremely cheap. I had not previously considered this because of my own inertia to change. So upside only really.
A recent conversation with an economist has made me pause to think about my perspectives (there are NO short conversations with economists ). He claims that statistically speaking it would take 14 thousand years to be certain of dying in a motor vehicle accident and about 3 million years (YES MILLION) to die in an earthquake. What we can conclude from the recent event is that the relationship of damage to commercial buildings and seismic ratings is not linear in fact if anything the relationship could even be inversed. This irony is not lost on the many owners of ‘prone’ buildings around the CBD. Please be quite clear, I have benefited greatly from the business of locating tenants to buildings with higher seismic ratings so why should I now wonder if this is always the best idea. Of the buildings I manage, 2 had not a single paint or plaster crack and they are rated a middling 67 and 70%. Another newish building which is 100% sustained a heap of unsightly paint and plaster cracks. So do I conclude we need better engineers with better formulas and models to manage and predict building performance or do we need better plasterers?
What we can observe is that the buildings which were substantially damaged were not classed as prone and they are localised in around Thorndon and Courtenay Place. It might be more about the soils and levels of compaction but also we know that not all the buildings in these locations behaved alike. We are lucky because the big earthquake happened while we were in our beds. I may be wrong but I understand that in only one of those buildings which sustained substantial damage, someone may have been killed if they were sitting inside them at the time. I have learned that just because a building sustains damage does not mean it fails diabolically. So every earthquake is different and will have different effects around the city and every building will behave differently irrespective of rating and probably won’t kill me, the risks are well under the risk of driving on Wellington streets. Therefore I conclude that we cannot rely on the engineers and unelected council bureaucrats to absolutely keep us safe. Stepping out into dangerous territory now I think that any adult who chooses to live or work in Wellington has to accept the risk in this regard. If you don’t like it then it is really time to move out of town. Where in New Zealand is truly safe I cannot say so maybe across the ditch is best for you, but hold on, they’ve got ‘bities’. Things with big teeth that bite, hurt and kill you, now they truly terrify me!
December 19 2016 | Uncategorized | No Comments »
I have been getting quite a bit of push-back lately from tenants who don’t see the value in signing off a Deed of Lease. Firstly most don’t realise that the Agreement to Lease is not “The Lease” and secondly I suspect they don’t appreciate being obliged to spend more money on legal fees.
A Deed of Lease by it’s nature encompasses more detail and covers for more eventualities than a standard Agreement to Lease. When I first started it was common to use the BOMA format which was 38 pages and then over the years various versions of the Auckland District Law Society form have become standard (15 pages including cover) with increasingly more tenant friendly clauses.
Tenants are contracted to sign a Deed of Lease by virtue of a clause in every Agreement to Lease, and if they are lucky a good agent is able to negotiate out of having to pay the landlord’s legal costs for this. I think it is simply prudent if the tenant understands his obligations and responsibilities when committing to a lease arrangement. Most tenants enter into a lease contract in good faith and expect to pay the rent for the term but I suspect few know what happens when they cannot pay or when they wish to leave. Rent reviews are a major minefield and tenants should understand how to best navigate through this process. Many people do not know the difference between a Right of Renewal and a rent review and I assure you they are very different things. I used to describe myself as a ‘bush lawyer’ where I might do my best to explain the differences of these items but these days under the current regime it is dangerous to offer such advice and I always advise potential tenants to discuss the terms with their lawyer.
A Deed of Lease provides certainty of contract, it encompasses numerous events like what happens when you leave or are struck by a disaster like an earthquake. The Agreement to Lease which an agent usually prepares, covers the commercial terms and the major and pertinent points. Agents strongly prefer prefer not to engage in the minutiae of the Deed because it will usually bog proceedings down into the fine detail and they prefer the Deed to be negotiated by the 2 lawyers acting for each side. May I suggest you make sure that the Agreement to Lease expressly declares that the Agreement and the Deed shall not merge and the Agreement shall remain in full effect which simply means that the Agreement sits on top of the Deed and where any item in the Agreement will prevail over the Deed.
Lastly a signed Deed of Lease is a more easily enforceable document should the need arise. It is not common that a tenant needs to take legal action against a landlord but it certainly does happen in cases of failure to provide quiet enjoyment, maintenance issues or to enforce due process for an “unreasonable” rent review.
Tenants sign your Deed!
August 06 2015 | Uncategorized | No Comments »
A few weeks ago I took a call from a woman wanting a space of just 60 – 70 sqm. After asking a few more questions I established we were looking for space for 7 people! As usual I didn’t hold back in offering here the benefit of my vast experience and knowledge on the subject (surely we are looking for 150 sqm at least being 15 – 20 m2 per head etc.). Apart from anything else surely so many bodies in close proximity would be a bit whiffy ( I described it as a teenager’s sock). Of course my caller ignored my advice, she ended up staying in the same spot of 55 m2. Perhaps it was a budgetary constraint or perhaps it was payback for staff she didn’t like?
A piece in the a Sunday paper caught my eye about an Auckland design company Spaceworks who have done some really interesting work polling employees about work place characteristics, while none of the findings are surprising I think they bear out the need to consider the office space as a key element in worker satisfaction and productivity. Some 8 out of 10 believed the physical workspace and provision of natural light had an impact on their wellbeing. In addition the interior layout has a substantial impact on recruitment and retention.
Some modern work practices like hot-desking may not be the greatest thing in the real world with 91% of respondents wanting their own personal desk space and room for personal items. Design elements like colour and meeting spaces add greatly to satisfaction ad opportunities for collaberation and creativity.
Stacking workers into desk farms in the cheapest space you can find is a short sighted strategy, most people require a pleasant and comfortable environment to keep them productive and coming back to the job. Get advice from a good designer to turn your drab office into fab!
May 12 2015 | Uncategorized | No Comments »
Like most real estate agents I glance at the commercial pages of the DomPost every week and recently noticed an unusual trend, namely that there are a number of good buildings on the market for sale. For the last few years the pages have been filled with mortgagee sales and distressed stock. By distressed I mean buildings suffering from a loss of tenants due to a lack of maintenance or poor seismic rating and an owner offer suffering from liquidity problems. Now however we have a number of larger sales with buildings like Grant Thornton off Featherston St and more to come as the Precinct portfolio is being marketed currently. The buyers are usually names we know well but occasionally a new face like a certain ‘overseas buyer’ who happens to currently live in Whitby.
For real estate agents they generally have to make minor adjustments to their databases to note who manages what but for tenants of these buildings, they can enter ‘A whole new world’ to quote Paul Hastings, the godfather of commercial real estate agents in Wellington. Paul is a tenant in such a building, having been recently sold to a new owner and seeing the effects of a new focus and new capital expenditure.
When a commercial building changes hands office and retail tenants can have significant change forced upon them. A new owner may have a completely different agenda and a new and large mortgage to pay. A new owner will almost certainly have their own service providers and so those maintaining the lifts, air-conditioning particularly may get replaced with new service people who will take their time to learn the eccentricities of the equipment. In addition the occupants will have to get to know and work with new building managers who will operate with different accounting systems.
Tenants often find out that any goodwill they may have amassed over time with the previous owner has disappeared as new owners are often keen to maximise building value at rent review time. The upside is that new owners can often bring new life and capital to tired common areas and facilities, foyers and facades.
Tenants might want to bear this issue in mind when they choose their commercial space, landlords know that tenants come and go, therefore the reverse can be true too!
Lastly I have just become aware that these pages have been spotted by someone in the US, this is the 85th most popular real estate blog in the english speaking world apparently, I don’t know if I should be insulted or congratulated!
<img style="max-width: 100%;" src="http://www.rebateszone.com/blog/wp-content/uploads/2014/11/top-100-real-estate-blogs.jpg" alt="Top 100 Real Estate Blogs"
An infographic by the team at Rebates zone
November 21 2014 | Uncategorized | No Comments »
This attractive starry lit promenade is Hastings Street in Noosa, certainly one of my most favourite places in the world! A recent holiday there started me thinking about the ‘Field of dreams’ maxim for developers above in regard to how to create an attractive shopping street where people will want to go. Contrasting Hastings Street with the numerous For Lease signs in Willis Street and Queens Drive, I decided to pose this question to Allistar Cox, Wellington architect and designer of numerous hip restaurants and bars including the Mojo coffee chain.
I met with Allistar in his very modernist studio over a tasty brew and he enthusiastically showed me some pictures of one of his favourite cities Tokyo, again the same fairy lights providing a soft welcoming glow but 50 times the scale of Hastings Street. ‘Shopping districts are for pedestrians and people not diesel buses!” he claimed forcefully. “Retailers pay huge rates and are getting short changed because councils are not providing customer friendly streetscapes…” He raved about the need for friendly lighting (as opposed to the new lighting on Courtenay Place), seating and meeting places. Shopping is our number one leisure activity therefore councils and building owners must help retailers compete with malls and online retailing by providing a pleasurable experience intertwined with eating and meeting friends.
The conversation flowed towards the contribution required of the retailers. I also had a photo of a trendy eatery and bar from Hastings Street called Miss Moneypennys. The name went over my daughters head but it reminded me of the beautiful and playful character in Sean Connery era James Bond films. Obviously because of the climate, diners spilled out over a wide pavement and so the business was part of the street in a way. Back to the point though, I realised canny retailers recognise they must create a memorable and fun experience and even a sense of theatre. Shopping is the number one leisure activity, you want people to be entertained and come back for more!
I walked home on a cold winters night along Willis Street, there were plenty of people around and the stretch between the BNZ and Mercer St has a long line of fashion boutiques, all had expensive fitouts and beautiful stock to sell but at 6:15pm on a friday evening half were shut! Attractive shopping strips require creativity and good design, building owners and council must contribute their part and the retailers have to pull together with nice stores, update their offers and stay open when shoppers are at leisure! Allistar was right, the whole chain is only as strong as the weakest link.
June 06 2014 | Uncategorized | No Comments »
A few months ago now I spotted a slight adjustment to the alloy statue on Midland Park called Woman of Words which is a tribute to Katherine Mansfield. Ok I am intending to be controversial here but I do think it rather ugly, I have spoken to several people gazing up at it and am yet to find anyone find it beautiful but who said art must be beautiful?
Anyway the adjustment was a woollen knitted flower placed in the statues hand, it lasted a couple of days but I consider the homespun aspect of the flower actually made the hard metal alloy statue somehow attractive! Now I do not encourage anyone to alter or even take it upon themselves to enhance public art works in any way, you should get prosecuted but in this case I just note…. what a nice change a little silliness makes….
October 31 2013 | Uncategorized | No Comments »
Location location location was the old maxim for successful retail in days of old but what of the new era in post GFC 2013? Aren’t the fastest growing retail brands all located the cloud, wherever that is? It’s true that by turnover the most popular online stores used by kiwis are Air New Zealand, Trademe followed by Amazon. Several New Zealand sites like Fishpond and Torpedo7 have a huge Australasian following but the point is that while New Zealand business are prospering and participating in the online global economy, all these noted here are taking business away from traditional main street retailers using commercial real estate to operate.
A recent US survey claims that 45% of respondents in Generation Y also known as the ‘Millenials’ spend more than one hour per day shopping online! It astounds me they have so much spare time, no wonder the traditional TV stations are trending downwards. The gist of this particular report was that big shopping centres in the US were remodelling to provide more food and entertainment options as 25% of respondents of the same survey say they dine out more than once a week.
Anyone walking Wellington streets can observe a good number of ‘For Lease’ signs littered on empty windows in virtually every street block. It shows e-tailers are winning, right? Reports from Retail Trade Surveys published by Statistics New Zealand suggest pretty modest increases in retail spending for 2011-2012 of just over 1% no doubt accounting for a similar movement with inflation.
Yet many brave entrepreneurs open shops against all the odds and have a go. Yesterday I saw a new hair salon with a coffee bar, and a bicycle shop with a full café inside its doors. New ideas come and go, I have leased shops to some who have succeeded and some have faltered and even failed. Maybe that’s why so many, particularly the younger ones,are prepared to try new things, if only on short term two or three year leases.
I have recently become involved with marketing a small retail site of about 50 m2 with a fairly full asking rent and I am astounded how many enquiries I have received on it, within a week we got a good offer on it and now we have three other parties ready to pounce should the first guy fall over.
So this made me wonder about the long term vacancies and whether they would lease if the rent was brought back, or is this a sign of a larger structural issue. For example, in Lower Hutt’s deserted (or is it devastated) High Street and Queens Drive, where so many empty shops are bigger than 150 m2 you could well ask if they would be more attractive and therefore lease-able if they were smaller.
Recent commentaries from PWC on online retailing predict that in NZ online retailing is currently worth $3.2 billion and likely to increase by 14.9% compounding every year. Some 1.9 million kiwis spend on average $1,659 on online purchases and this is turnover local retailers would have traditionally enjoyed.
But against this online tsunami I recently leased a large site in Willis Street which I can recall has seen the downfall of at least four or five previous tenants. I was able to encourage one brave soul to make an offer at two thirds the asking rental set by a valuation. Fortunately he was met with a pragmatic owner prepared to accept far less than what was once considered ‘value’ at a level which we all hope will enable the new business to survive.
In closing it’s true that some are prepared to pay up to $3,000 per m2 for Lambton Quay and $1,500 per m2 or more for Willis Street. It is also true that a cluster of vacancies are of very similar size and price ranges. Yet I am convinced there are keen and brave entrepreneurs out there willing to give it a go and retail not e-tail. Maybe landlords aren’t going to thank me for this opinion; but if your shop has been vacant for more than a few months or even years, then think about changing the size and shape if you can, you may have to render areas past 10-15 metres depth as storage space or garage. And now living really dangerously you may have to throw away your old valuations and consider why the last tenant left and if they survived, then ask a few prospective tenants what can they really want and can afford to pay?
May 24 2013 | Uncategorized | No Comments »
Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.
April 02 2013 | Uncategorized | No Comments »
“Abundance – The future is better than you think “ by Steven Kolter and Peter Diamandis was 2nd on the NY Times bestseller list back in March. What they are saying is that humanity is entering a period of radical transformation where technology can lift living standards with goods and services previously reserved only to royalty could now be available to all. Right now they say a Masai warrior in the african bush with a smartphone which is connected to google has more communication and information than President Clinton in his day 20 years ago.
For those of us who are cynical and brought up on the scarcity model of economics (Malthus) and a diet of modern media bombarding us with messages about doom and particularly global gloom they blame the amygdala, a part of the brain developed to take notice of danger and so this distortion in the news gives us a negativity bias. So big picture or at a macro-level they claim the numbers support the notion that the whole of humanity has better a standard of living than ever before, average lifespan, real income, childhood mortality, the cost of food and communication have all moved in favourable directions in the last 50-100 years. Also we are living in the most peaceful time of human history.
The wrapping of the book is designed to look like aluminium because they identified that back in history it was the most expensive metal on the planet and used for dinnerware by royalty in the 1840s, however now with the development of electrolysis aluminium is used to wrap throwaway items. This is seen as a precursor for many aspects of our world that are changing at an accelerating rate due to 4 emerging forces:
1. Technology. They cite Moore’s law which states that every 2 years computing power doubles and costs fall and they claim that right now we are at the knee of the exponential curve (where it goes from 64 to 128 and 128 to 256) and so the advances are really starting to accelerate now in the areas of artificial intelligence, nano-technology, robotics and healthcare.
2. DIY innovators. They observe that smaller inventors can quite often achieve solutions to major problems usually assigned to government agencies. One example might be the Slingshot water distillation system (Dan Kamen who also invented the Segway) which is as big as a fridge yet extremely economical to run and can convert contaminated or sewage water into clean drinking water, some 1000 litres per day for 2 cents per litre.
3. Techno-philanthropists. Some large world problems are being addressed foundations like the one funded by Bill Gates who aim to eradicate malaria. The X prize foundation (Dan Kamen and author Diamandis are on the board) have offered a $10m prize to the inventor of a tri-coder, a gadget used on Star Trek which as big as a cell phone will diagnose illness better than a team of doctors from a drop of body fluid and using online access from the cloud perhaps using IBM’s Watson supercomputer. When not if this arrives they claim will offer access to modern healthcare to anyone including poor communities some distance from a doctor.
4. Access to the net. By 2020 some two thirds of the worlds population or another 3 billion people will plug into the internet and global economy with corresponding education and commerce outcomes.
The authors claim that these forces combined offer humanity a once unimaginable scenario where all the world’s peoples have clean water, nutritious food, housing, education, medical care and non polluting energy!
The authors show that history proves that birth rates will always fall where populations have access to clean water, education and freedom for women. Technological advances mentioned above and access to the internet will gradually and assuredly bring these changes to communities currently in the 3rd world.
Other significant changes they predict will be in the area of food production. They claim that 1 acre of a traditional farm can produce the same quantity of food as 1 square meter in a vertical farm i.e. a farm in a multi-storey building using hydroponics and located in the city. These are controlled environments using a fraction of the water, without the need of pest controls and because they are located inside city boundaries no food miles.
Genetic engineering they claim will bring fortified rice with vitamins and minerals and in-vitro meat or cultured meat made in bio-reactors could end beef farming as we know it being heavily resource dependant and reliant on food miles.
And so the future of agriculture is not in the country but in the city! Remember you heard it here first.
This book is important for me because it considers that abundance really is possible despite the significant problems we now face on this planet, that participation in the global economy can be empowering and enable us to solve the worlds problems together.
Check out one of the authors on TED Talks, he really is a fascinating guy!
Brendan Clegg May 2012
May 30 2012 | Uncategorized | No Comments »
Yes I am a real estate agent so you are going to say this question is designed to be self-serving but lets explore this idea for a moment. The fact is that unless your budget is at least $15k then commercial real estate agents will be able to help you but probably on with one or two options. The reason quite frankly is that the commission from a rental is less than the minimum fee that most agencies prefer to stick to and therefore chasing a deal for $15k rent or less is just frankly an uneconomic use of our time.
There are signs all over town, I can find space by myself easily?
It’s true that when you start looking at office space then new signs suddenly become very visible (same effect as new cars). Anyway yes you could look for a real estate sign in a location you want and might luck in and find the building owner. The building owner will gladly show what space they have whether it’s the size you want or not. Commercial landlords expect to deal with real estate agents and are always happy to pay a fee to them to secure new rental income. Experience repeatedly proves that landlords needs and requirements are usually 180 degrees away from those of a tenant. Landlords expect the agents to groom their tenants, to take them to their building only if the size and style of space is suitable, to advise them of different deals in order to learn what is reasonable in the market and these things are best achieved by an independent person.
When I contact an agent, what should I tell them?
In short as much about your requirements as possible and please tell them your real budget. The truth is tenants want to pay as little as possible, I get that but if you tell them your budget is only X which the agent determines to be well less than market then the agent is less likely to extend themselves and find the perfect space… if you hear the words “if I find the right thing at that price I will ring you back….” which is code for no you won’t!
Why would I want to pay an agent?
Typically a tenant receives a great deal of advice and effort and expects to pay nothing for it. It’s an unusual quirk of the business but there it is. You will motivate an agent to work hard for you if you make it clear that you will work exclusively with him for a time. The last thing they want to hear is that they are the fifth person you have called today, by simple averages they are not going to achieve a sale and they are better off looking to service someone else. So another approach might be to say to your agent ok I will pay you. Now agents are bound by a code of ethics and legislation to make it clear where they are being compensated so if a tenant pays the agent then there is amount you could easily recover as rent free or incentive from the landlord because they expect to pay anyway. Real estate agents only have their time and expertise to sell. If you agree to pay them then they are effectively guaranteed a fee, a return on their time. Therefore they can afford to take their time, look under every rock and present all the options and allow you the tenant to choose from a level playing field.
One last word…
That’s easy! Choose someone who knows the area, has experience and knows their way round a contract. And good luck!
August 31 2011 | Uncategorized | No Comments »