TelferYoung (Wellington) Limited
Wellington Newsletter - December 2006
22 December 2006
The Directors & Staff at TelferYoung (Wellington) Ltd wish you a happy holiday season and a very prosperous new year.
We thank you for your support during the past year and look forward to continuing our association.
Staff Announcements
We are pleased to welcome Wendy Tampeau and Stephen Batt to our team.
Wendy has practised residential and commercial valuation for the last four years in the Horowhenua, Kapiti and Porirua Districts. She has built up a sound local knowledge and will continue to specialise in these areas for TelferYoung. Born and bred in Wellington, Wendy has a background in real estate having worked as a sales agent in the Porirua area for a number of years.
Stephen has practised in the commercial sector in the Wellington region for the last two years. He has a background in property investment and he will mainly focus on commercial and industrial valuations in the wider Wellington region.
Office Market Survey
Total office space in Wellington's Central Business District (CBD) as at June 2006 was 1,393,044 m2, up from 1,370,132 m2 six months previously. Additions include the Annex to No 3 The Terrace and the Statistics Building on Harbour Quay. For the first time the Thorndon precinct has been expanded to include the Centreport Harbour Quays buildings, where further building development is possible.
The overall vacancy rate for the Wellington CBD has reduced over the last six months by 1.08%. It now stands at 7.14%.
The precinct vacancies have moved as follows:
Jun 05 | Dec 05 | Jun 06 | |
| CBD Total | 9.02% | 8.24% | 7.14% |
| Core | 10.30% | 7.51% | 5.72% |
| Fringe | 12.29% | 11.70% | 13.02% |
| Te Aro | 7.47% | 7.59% | 8.40% |
| Thorndon | 2.38% | 7.28% | 4.18% |
Several significant Government tenants have decided, or are in the process of negotiating with owners, the construction of suitable buildings to meet their specific accommodation needs. This will lead to a number of tenant moves, which could impact on the lower quality vacancy rates. Several private organisations are also due to relocate. These moves will have a significant impact on the market, creating opportunities for other tenants, but will require owners of older buildings to ensure their accommodation is in optimum condition to facilitate ongoing occupancy. Major moves coming up include KPMG, Chapman Tripp, Ministry of Defence, with significant leasings to Westpac and the Airways Corporation. The Ministries of Health, Fisheries, Education and IRD will complete their moves which were underway at the current survey date.
Government occupation of offices throughout the city is a feature of the current market and this is likely to intensify in Wellington with the significant expansion in the state workforce. The public sector has been a significant force over the last six months, increasing their total occupation by some 19,500 m2 over the period. Many Government agencies are seeking to improve the quality of their accommodation and larger areas of space within reasonable proximity to the centre of Government are being rapidly taken up. Some tenancies have been negotiated but the department concerned has not yet taken up occupancy pending completion of fitouts etc. Since December 2001 Government occupation in the CBD has increased by over 115,000 m2, (27%), and now occupies 37.73% of the total available office accommodation in the CBD. Over the next two years, further significant expansion can be expected.
Over recent years education has been a significant growth sector for the Wellington CBD. In addition to the administration functions of the Government and traditional educational uses, many foreign focused language schools have started operations, although the rationalisation of this use is now becoming apparent with the reduction in overseas student numbers. The following graph shows the change in occupied floor areas in total and by precinct.
Education is a small but significant occupier of office space, accounting for some 7.72% of the total available office space within the CBD. See graph above.
Bad publicity, the recently high NZ dollar and aggressive marketing by some other competing overseas countries have affected the number of foreign students studying in this country. A number of organisations have closed or reduced the scale of their operations. The area of the city's offices occupied by educational organisations peaked in December 2004, and has declined over recent surveys, and further rationalisation is possible.
Property Cost Allocation
Investment property can offer significant tax savings over other forms of investment through the use of different depreciation rates for various parts of the property. The Inland Revenue Department (IRD) is currently reviewing this policy and we understand this will allow depreciation on chattels which are not considered to form part of the physical structure only. Items listed on IRD's residential rental chattels depreciation schedule such as hot water cylinders, whiteware, light fittings, dehumidifiers and heating systems will still be able to be depreciated separately.
The threshold for the asset determination rate increased on 19 May 2005 to $500. This means assets costing less than this amount can be expensed in full in the year they are purchased provided they are:
- Not purchased as part of the initial investment;
- Do not comprise part of a larger asset eg table purchase is part of a dining suite;
- The combined sum of goods purchased from the same supplier on the same date for items carrying the same depreciation rate do not exceed the $500 threshold.
Items which have been depreciated separately in the past are now viewed as part of the physical structure eg fitted kitchen joinery, electrical reticulation, plumbing, plumbing fixtures, partitions etc. They must be added to the cost of the building on the next tax return together with the accumulated depreciation. This indicates the depreciation will form part of the depreciation claw-back on exit. By maximising your depreciation allowance allowable tax deductions are increased. TelferYoung can allocate the value of cost to these items on an individual basis at your request.
Back issues of the newsletter can be obtained from TelferYoung (Wellington) Ltd
Level 9,
85 The Terrace,
PO Box 2871,
Wellington.
Ph: 04 472 3683,
Fax: 04 478 1635
www.telferyoung.com
email: telferyoung@wellington.telferyoung.com
+ Adrian Brady + Chris Barnsley + Martin Veale + Jerome McKeefry + Lindsay McAlister + Graeme Kirkcaldie + Stephen Batt + Jason Lochead
Opinions expressed in this newsletter are of a general nature and should be used as a guide only. TelferYoung should be consulted before acting on this information.