5 Short Street, Newmarket, Auckland
10 April 2017
5 Short Street, Newmarket, Auckland was purchased in 2004 for $8.8m and has moved from strength to strength under PMG.
Occupying a good location in Newmarket, it has retail on the ground floor, seven floors of offices above, totalling 4,200sqm, and 35 car parks.
However, the building had become dated so PMG embarked on a plan to fully refurbish it, again, in conjunction with a leasing programme. In 2013 Auckland University purchased the Lion Brewery site adjacent, presenting a real opportunity for this area to change significantly in the near future.
“We were confident that if we were to provide the right quality of office space in such a location, we would attract great tenants,” says Scott.
“Our experience shows that new tenants will not commit to a building based on a planned refurbishment, which is a mistake many landlords make. But with the pending arrival of a university campus, we knew tenants would be prepared to secure their space in an area about to undergo significant improvement,” he said.
PMG prepared and presented a feasibility proposal to the building owners which was accepted. After successfully negotiating an early surrender of two tenants, PMG started the refurbishment which included:
• The first stage was a refurbishment of the ground floor lobby to provide a modern, well-lit, attractive entrance incorporating a new lift area and modern signage. It was interesting to hear how much of a `lift` it gave the existing tenants.
• Full refurbishment for a key tenant resulting in a new nine-year lease being signed.
• Floor-by-floor refurbishment.
• Refurbishment and provision of separate bathroom facilities on each level, as well as shower facilities which were asked for by several tenants.
The Bottom line:
5 Short Street has moved from originally having six tenants, to now an excellent, diversified mix of 21 and will soon be 100% occupied.
Rents have risen from less than $200sqm to over $250sqm throughout the repositioning process.
PMG has ensured built-in rental growth through negotiating favourable rent review clauses in the leases.
The building was sold to PMG Direct Office Fund in 2016 for $14.2m, again representing an excellent return on investment for investors.