Council ponders becoming $20 million property developer

By Chris Hutching

Friday 2nd June 2000

OLD IS GOOD: The council would like to see more refurbishments like the Old Government Building, now a hotel

Christchurch mayor Garry Moore is floating the idea of setting up a $20 million council-backed property fund to encourage refurbishment of old buildings in the city.

The move has raised fears local bodies may compete head to head with the private sector.

Some civic leaders believe they must intervene to counter decentralisation by government departments and the shrinking presence of some national firms.

Mr Moore is convinced that if his council fails to intervene the city will develop what he calls "the doughnut effect" where inner-city activity reduces and becomes focused in satellite suburbs.

Market analysts point to new opportunities where tenants are slowly leasing older space with the aid of various inducements from keen landlords. Older buildings requiring upgrading have the highest vacancies.

Mr Moore is not prepared to wait for a market self-correction in which property values fall to a level where new developments become viable.

So he has suggested the proposal - yet to be accepted by other elected representatives - to set up a $20 million fund to buy strategic properties and develop plans that may be on-sold to private developers. He wants to establish a new local authority trading enterprise that will administer the money.

Recently Mr Moore set up an inner-city revitalisation board to oversee this process, including inner-city business leaders and property owners such as Philip Carter and Anthony Gough, and architects such as Sir Miles Warren. Some of these businessmen have worked with the council on joint ventures recently.

Carter Group's retail redevelopment in Cashel St was supported with $20 million of ratepayers' money in return for car parking and a bus interchange. Similarly the new Farmers building in Gloucester St was supported by about $6 million of ratepayers' money in return for public car parking.

While these projects were joint ventures, Mr Moore is now talking about the council buying strategic properties and formulating development plans for sale to the private sector.

But a recent purchase from council funds was the historic Coachman Building in Gloucester St whose owner, MP David Carter, obtained a demolition order, spooking heritage-minded councillors into buying it for about $1 million.

It stands empty and deteriorating with its current value estimated at around $600,000 if a buyer could be found.

The prospect of more council expenditure has alarmed one Property Council representative in Christchurch, Mark Munro, who said his telephone had been ringing hot from members about Mr Moore's $20 million proposed fund.

"We're keen on the city council facilitating and attracting businesses here but we're worried about them going any further because frankly they're just not that good at it," Mr Munro said. "They don't have the skills. We're also waiting to hear more about rumours that the council wants to spend ratepayers' money on a new office building for its staff. That wouldn't help the city or its vacancy rates at all."

Mr Moore is also keen to increase demand by boosting Christchurch's population by 200,000 immigrants to provide the economies of scale necessary for a public transport system, repopulate the inner city and provide other efficiencies he believes will enhance Christchurch's environment.

He met with Immigration Minister Lianne Dalziel to discuss his immigration proposals.

In Christchurch the overall office vacancy rate has remained at about 16% in recent years although the four top-tier office towers are virtually full. There have been rumours recently that Carter Group is keen on buying the central King Edward Barracks in Cashel St from Ngai Tahu for $4.1 million for a new office building but Carter Group managing director Philip Carter said he was merely maintaining a watching brief.

Several retail redevelopments are undeway in the Christchurch central business district anyway and there are some major relocations of firms into refurbished older office buildings, such as law firm Anthony Harper moving from Kilmore St into the former AMP building in Cathedral Square.

There are plans for other old Christchurch properties such as the stalled Cathedral Junction development under contract to Equity Pacific Trust, while the historic Avon Theatre and Public Trust building is being prepared for new restaurant and bar tenants.

Meanwhile, Dunedin's latest office vacancy level as surveyed by Macpherson Valuation has risen from 19% last year to 21% this year largely as a result of Inland Revenue moving from Cargill Hse into half as much space in the recently-refurbished Philip Laing Hse. The property is near John Wickliffe Hse, which was also refurbished and syndicated a couple of years ago.

Macpherson Valuation director John Fletcher said some of the biggest vacancies were in older buildings that were in transition as owners identified new uses for them.

The Dunedin City Council was also working to attract new tenants to the city.

At the southern tip of the South Island in Invercargill no one is keen to even measure comparable vacancy rates. An indication of the space available was provided by a real estate source who said there were 43 empty shops and 14,000sq m of office space available. Even so, new developments are being completed and planned including a new Woolworths, a Burger King and a Farmers store in Dee St.

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