George Hulbert 18 August, 2019
Following the great feedback we had from the interview we ran with Colliers International CEO Mark Synnott, we now offer you the considerable insights of Scott Pritchard, CEO of long-term CoreNet sponsor Precinct Properties.
As leader of the Precinct team since 2010, Scott is responsible for the strategy and operations of a nationwide portfolio of assets that was valued in July this year at just over $2 billion. The portfolio includes a number of the country’s biggest new developments, including Commercial Bay in central Auckland and its innovative soon-to-be neighbour in Wynyard Quarter at 12 Madden Street, as well as the Bowen Campus redevelopment in central Wellington.
It is hard for anyone who hasn’t been into or through Auckland’s CBD over recent months to miss Commercial Bay as it leaps out of the ground. How is the project coming on - what news can you give CoreNet members?
It is exciting times at Commercial Bay, for sure. We have just about finished the dig for the CRL tunnel, and it is nice to see structural steel going up in the central city.
Fletchers has taken the structure of the new office tower up to the level 7 lobby (see a video slideshow of progress, right). This floor is just about to be poured, which is an exciting phase for the office tower. Once the slab is poured, the balance of the structure will go up quickly: the pace will be really impressive.
The Commercial Bay precinct includes retail and commercial and is due for completion in June 2019 – a little under two years away now. I am really excited about the prospects for the project as the market, economy and the America’s Cup are coming together to create a really supportive environment for the project to land into. By the time we finish, most of the CRL works around the tower will be completed too, so it will be an exciting place to be.
The office tower component of Commercial Bay is over two thirds leased now following recent leasing activity, and the retail components are well over a third leased. The retail mix we are creating is very exciting, with a number of new entrants to the market for Aucklanders to look forward to.
Watch the video below to see how Commercial Bay is progressing on site:
Moving over to Wynyard Quarter, CoreNet gave members a sneak preview tour of your new building at 12 Madden Street on 3 August. How is what you are doing going to take the corporate real estate offer up a level for Auckland businesses?
The first stage of our work in Wynyard Quarter is now complete. We finished building work on the Mason Brothers building in December last year, and 12 Madden St was just completed in June. This circa $100 million first stage is 100% leased, with all of Mason Bros. occupied.
12 Madden Street is a flagship building for us. The 8,500m2 space we are creating there goes well beyond a traditional office development, as we are creating an environment in which innovative businesses can thrive.
The GridAKL manager at 12 Madden Street, Generator, is currently fitting out and has just now commenced its management regime. We are big fans of Generator as a leader in the world of coworking: our sense is that many other coworking spaces are very generic, but Generator has cracked the culture puzzle. They have created a great culture in their existing spaces, and developed places that people want to get into. From what we have seen so far, albeit early days, there is a lot of demand from the type of occupiers that we want in that location.
This is also where CoreNet is a great fit for us. CoreNet is really a proxy for an occupier base we are really interested in. We observe that there is a massive global war for talent going on, and businesses generally put a large amount into their premises to attract good people. The insights we get through CoreNet into our occupier base are important, as they enable us to offer the highest quality real estate in response to those demands. Listening to CoreNet members to understand their decision drivers is valuable work.
How is Wynyard Quarter now coming into the centre of the Auckland corporate real estate thought process?
Wynyard Quarter always was a slight widening of our typical investment strategy. Coworking is a thematic that is definitely playing out, and our investment in Generator earlier this year shows the potential we see in the role of the precinct and the Generator offering in the coworking market, as well as innovation more generally in Auckland.
I also think what Willis Bond have come up with residential components that are highly complementary to what we are doing. In my view, the quality of the residential offer surpasses what we have seen to date in Auckland. The theatre company brings another type of amenity, and the hotel that Fu Wah is building further complements the location. Further residential development in the location will only strengthen the offer and provide a level of vibrancy we have not yet seen in Auckland, particularly along the waterfront: and there’s such growing demand for this location.
One other thing I would say about Wynyard Quarter is that our key partners are playing very important roles. We consider Panuku Development Auckland, the owner of the freehold land, as a JV partner. They have a really progressive approach to the quality of the real estate – well beyond a typical office park. You can see this in the first stage, and the designs for stages 2, 3 and 4 take the same approach. Equally, ATEED is focused on growing the economy in Auckland and has done an outstanding job in fostering the innovation precinct. They are putting a structure in place to attract SMEs and small ICT companies, creating an environment in which innovation can truly prosper.
More generally, what opportunities and challenges do you see in the corporate real estate sector at present?
We’re seeing continued growth in employee numbers in Auckland, and we are seeing some response from a supplier perspective. With population growth continuing as it is, and its high correlation with employees working in Auckland’s CBD, we’ll see continuing demand for CBD office space. This will play out in turn for investors as positive rental growth – which is good. But with construction costs where they are and restrictions on lending in place, we don’t see huge office building activity taking place over the next three years.
In Wellington it is different for us. There has been a massive withdrawal of stock, and a strong focus on seismic strength – a definite flight to quality. That said, businesses are not just focused on NBS ratings but also on resilience… which brings me to another Precinct project I’d draw your attention to: the Bowen Campus redevelopment in Wellington.
Bowen Campus is right in the heart of the parliamentary precinct, next to the Beehive and Parliament. The campus encompasses approximately one hectare of land and houses the 10-storey Bowen State Building as well as the 15-storey Charles Ferguson Tower. Aside from the obvious advantage of being so close to Government, transport facilities are nearby, as are a number of cafes, bars and other services.
Bowen Campus is progressing very well. Furthermore, there’s not quite the same pressure on the construction market in Wellington, so it wouldn’t surprise me to see more development in Wellington as the demand for high quality real estate in the CBD continues to grow and the Crown focuses on getting back into their space and operating into the future.