High profile Queen St tower on market

"Queen Street investment opportunities of this scale become available only very rarely," says Warren Hutt, senior director, CBRE who, with John Stringer of Barfoot & Thompson Commercial and colleague Cam Paterson, is marketing 350 Queen St for sale through an international deadline private treaty campaign closing on Tuesday December 6 at 4pm.

The building, with a ground floor retail level and eight office floor plates, has a net lettable area of 4876sqm and occupies a freehold site of 1178sqm.

Constructed in 1983, it has an A-plus seismic rating and an assessment of 185 per cent of the New Zealand Building Standard (NBS) and was significantly refurbished and upgraded in 2012. It generates total passing net annual income of $2,748,000 per annum plus GST split almost evenly between retail and office tenancies.

"Eighteen retailers, mainly food outlets, pay 50 per cent of the total rent or $1,385,000 per annum, while over 62 per cent of the office income is received from Otago Polytechnic Auckland International Campus [OPAIC] – a partnership between Otago Polytechnic and Future Skills Academy," says Hutt.

"Occupancy is 100 per cent and the property has a weighted average lease expiry [WALE] of 3.5 years with the income underpinned by OPAIC’s new six and half year lease commencing November 1 this year."

Further development potential

Stringer says the property has further development potential to add significant additional area and is strategically located close to Auckland’s arts, entertainment and education precincts.

"The building is currently 33.5 metres in height and could go up to 50 metres under its zoning. There is the potential to double the existing floor area of the building by constructing as much as an additional 5000sq m of floor area on the site.

Location

"It is directly across from Aotea Square in an area is recognised for its cluster of cultural facilities including: the Auckland Town Hall, the Aotea Centre, the Civic Theatre, the Q Theatre, Auckland Art Gallery and the Auckland Central Public Library.

"The immediate locality comprises a mixture of retail, office, entertainment and residential properties and has the highest pedestrian foot count on Queen St. The University of Auckland, Auckland University of Technology [AUT] and the Academic Colleges Group [ACG] campuses are all nearby.

"The building is in a pivotal position at the gateway between the education precinct and the entertainment and retail precinct and is also just a short walk from the Sky City casino and new convention centre now under construction."

Stringer says all the modern office levels are fully air conditioned and are accessed by two new Otis high speed lifts. The building’s primary structure is reinforced concrete columns and beams, reinforced concrete floors and concrete spandrels.

Features

The external walls are spandrels panel with exterior glazing set in aluminium joinery. Interior finishes are generally carpeted floors and suspended ceilings.

"The tower levels are accessed from Queen Street through a fully refurbished modern lift lobby finished to a very high standard with marble floors, wood panelling and feature lighting," Stringer says.

Entry to the lobby, which has a digital screen providing tenant information, is through a double set of custom designed timber and glass doors providing automated access during the day and controlled access outside of office hours.

"Levels 1, 2, 6, 7 & 8 are occupied by OPAIC which has an extremely high quality fit-out. The remaining levels have been upgraded to provide for multiple tenant occupation with shared kitchens and meeting rooms," says Stringer. "All the floors have good natural lighting and are fitted with twin stairwells, vertical service ducts and male and female toilets. The office floors range in size from between 560sq m to 660sq m with the top office floor being smaller at 262sq m with a generous 90sq m stone-tiled balcony area."

Fire warning and protection system have been installed throughout the building with sprinklers on the ground level and hose reels on all the other floors.

Zoning

Paterson says the property falls within Strategic Management Area 1 (Core Strategic Management Area) in the Auckland City Council District Plan, Central Section, Queen Street Valley Precinct, which became operative in 2004.

"This zoning provides for a diverse range of office, retail and entertainment activities at the highest development intensity levels available within the Auckland CBD," Paterson says. "The area contains New Zealand’s highest concentration of high rise buildings and, given its diversity, provides for the widest range of development opportunities available. The prominence of pedestrian activity is recognised and therefore the zoning promotes a wide range of commercial uses."

Under the Proposed Auckland Unitary Plan (PAUP) the site is zoned Business – City Centre, Queen Street Valley Precinct.

"The PAUP was approved by Auckland Council on August 19 this year and is now referred to as 'the Decisions Version'," Paterson says.

"The City Centre zoning is at the top of the new plan’s hierarchy and plays a pivotal role in Auckland’s present and future success. The Business – City Centre zone seeks to ensure the city centre is an international centre for business and learning, innovation, entertainment, culture and urban living.

"The PAUP allows for the greatest intensity of development in terms of height and floor area within the city centre. As with the outgoing District Plan, a wide range of activities is permitted in the city centre zone including: office, retail, education, food and beverage, and entertainment."

Strong take-up in the CBD 

Hutt says the Auckland office market has continued to perform well throughout 2016 with demand from occupiers driving strong take-up in the CBD and this augurs well for 350 Queen St.

"Tight availability for prime quality office space for lease has also seen increased demand for secondary CBD office space - particularly in better quality buildings. In response to these conditions there has been a steady rate of office rental growth, with secondary rent growth being a strong performer.

Strong investment activity

"Reflective of strong investment activity, Auckland yields have continued to firm in recent quarters driven by a continued strong appetite from local and offshore investors and the ongoing shortage of CBD investment opportunities.

"In fact, yield firming on secondary grade commercial office buildings outpaced that of prime buildings during the past year and indications are that this momentum will carry through into 2017."

Hutt says the market is expected to continue to show value growth as the interest rate environment and the positive investment market momentum continue to drive lower yields. "We see more yield firming of core CBD assets, especially those with sound fundamentals and with value add/growth upside."