Commercially viable development essential to Chch rebuild

Commercially viable development essential to Christchurch city rebuild

Christchurch’s recovery will be delayed if developers cannot build profitably in the central city, Property Council warns.

In its submission to the Christchurch City Council’s draft Central City Plan today, Property Council argues that the vision of a new central city outlined in the Plan deserves high praise, but the critical test will be how the Plan enables the vision to happen.

Property Council chief executive Connal Townsend said many local property owners and investors in particular, were committed to rebuilding in the central city but this would not happen quickly unless they could build and supply office, retail and mixed-use products to meet a long-term demand.

“Christchurch City Council has identified in its Draft Central City Plan that the existing demand for multi-storey buildings in Christchurch is limited. However, demand will return over the coming decades.

“Investors, including new private investment from outside of Christchurch, will look to the longer term market and assume increasing rent yields and appreciating capital values.”

He said that in cities worldwide, quality commercial buildings attracted premium rents on higher floors and investors would demand a quality product built to code with the latest engineering expertise and ‘green’ technology.

“The vision outlined in the Plan for a lower, compact, greener and pedestrian-friendly central city is admirable. Property Council understands the city council has listened to its resident population and the desire for a safe and sustainable central city.

“The hard task now is to pave the way for an Operative Plan that is permissive and encourages private investment so the vision can become reality. It is a very crucial time for Christchurch and we cannot afford unintended consequences that will have an effect on the development of the city.”

Property Council South Island Branch President Graeme McDonald said Christchurch needed a plan that provided for the economic wellbeing of the city and region. “Unfortunately the strict regulatory approach in the Draft Central City Plan goes well beyond what is necessary and will hinder the re-build process.”

The global financial crisis had affected the commercial property investment market prior to the earthquakes. Mr McDonald said that now, with the compounding issues about insurance and obtaining finance, the hurdle was set much higher to make development stack up, especially on land that has little or no existing value.

The protection of existing use rights – fundamental to private property rights – would be an important factor for many property owners in their decision to rebuild. “Even if existing use rights still apply under the RMA, there is a 12-month time limit for owners to act after demolition, before those rights extinguish. The reality is that it may not be viable for many owners to submit a resource consent application within this period,” Mr McDonald said.

He said other factors in the Plan affecting profitability included the maximum gross floor area of 450 square metres for retail activities in the City Core, minimum 450 square metre gross floor area in the City Fringe zones, comprehensive urban design controls that create the need for a resource consent at the city council’s discretion, a requirement for buildings in the City Core to be built to the road with no setback, restrictions on the number of car parks and restrictions on commercial activity outside of the city centre.

Mr Townsend said investors were looking for quality commercial property with good yields. “We need to do everything we can to make new buildings and rebuilds commercially viable, while still being able to attract tenants at a price tenants are willing to pay.

“That means being able to lure businesses away from their temporary locations in the suburbs, where they currently enjoy reasonably low rent, ease of access and plenty of space for parking.”

ENDS

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