For those of us with a keen eye on Wellington’s property market usually can’t help ourselves but read Bob Jones’s column every friday morning. Wellington’s favourite curmudgeon relishes in taking a cynical view based on his viewpoint coming from seeing everything at least once before. The gist of last weeks piece was that the public sector’s mandarins were set to expire from hysterical laughter when asked by their new political masters to downsize or even dismantle their bureaucratic empires. He reminded us of a BBC satirical series called Yes Minister where maniplulating department heads always get the better of their fresh faced ministers and so politicians the world over refer to the show as a documentary rather than comedy.
There can be not doubt that the Wellington office market has benefited greatly from the expansion of the public sector over the reign of the last government. According to one source the numbers of front line teachers have grown by 12%, medical staff by 18% yet the numbers in the Ministry of Health have grown by a colossal 51%. I’m sure this is the most extreme example but it does explain why the ordinary man in the street who thinks their taxes pay go toward government services they can see and wonder how this can be and who actually reads and actions all this new ministry policy. Since then the PSA reported the smallest growth of public sector numbers in the ’07/08 year of 3.6%.
John Key claims on record that his ‘razor gang’ will not slash numbers but enforce a sinking lid on the public sector. There are those of us who were around in the 1990′s who recall the rise and rise of the consultant, individuals and small groups looking for small office suites around The Terrace in order to contract back to the departments and ministries from whence they came.
I see that the likelihood of northern CBD and The Terrace turning into an empty canyon is somewhat remote. Once the IRD consolidates into their new HQ in Bunny Street (some 25,000m2 in total) there will be some empty buildings around, those well located should lease or even pre-lease quickly after refurbishment but those in secondary locations like Manners Street will probably hang around. Also when the BNZ vacate from some secondary sites around Boulcott Street I can see the vacancy rate climbing back towards 9-10% which is about market equilibrium. We are going into the current recession with a vacancy rate of less than half what it was in the early 1990′s, I see no way that rents will fall to half as they did back then.
Market rental growth is achieved with low vacancy rates and new development activity, I believe the new administration will curb construction of new office towers which will only serve to keep a lid on vacancy rates and downward pressure on rents.
So maybe Sir Bob is right, Sir Humphrey will have his way, substantial change will be avoided… steady as she goes for Wellington!
Brendan Clegg 25 November 2008
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