Businesses which moved to the suburbs after the Christchurch earthquake have returned to the CBD, despite earlier concerns.
The Wynn Williams building, in the CBD. Photo: RNZ/Sally Murphy
The annual Colliers International Valuation Market Summit report shows a good level of leasing in the central city over the past nine months, with office vacancy sitting at 22 percent.
Many businesses shifted to the suburbs after the 2011 quake and, as the rebuild began, developers feared people would not come back to the city.
Colliers' annual report showed 100,000 sq m of office space had been built post-quake, with another 140,000 sq m under construction.
Colliers director of valuation Gary Sellars said the construction market was adapting to supply and demand.
"Vacancy space going forward is not as bad as we thought it would be - at the moment, is at a moderate level, but it is not catastrophic for the city's rebuild."
"Our research shows further leasing will occur before current construction is completed, there is an over supply but we will see construction slow down to meet demand."
Colliers director of office leasing Brynn Burrows said there had been a steady stream of businesses moving back into the city, which was providing confidence in the sector.
"Speaking to businesses, from a brand point of view they want to be in the CBD, their workers want to be working in a nice environment where they have good access to amenities during the day.
"Informal networking is also very important between businesses - I think that is something they didn't realise they had in the city until it was gone."
It was anchor tenants like banks, law firms and government departments that allowed developments to go ahead, he said.
The Terrace building. Photo: RNZ/Sally Murphy
Developer Antony Gough still has some office space to fill in his Terrace Project, which is due to open next year.
"The interesting [thing] was, we all thought there would be a huge drop in rents as the supply increases, but the Colliers report suggests the drop is only 10 percent, which is not bad at all.
"Businesses will be able to cut some great deals in the suburbs but they lack the facilities that come with the centre city."
Mr Gough said with tenants moving back into the city, the oversupply of office space will filter out into the suburbs.
"At The Terrace, we have smaller office spaces. People after a 300 to 400 sq m [space] usually look only a few months before they want to secure an office, so it is not worrying me.
"We are in the best position in town and I have no doubt all our office space will be leased."
Developer Ashton Owen built a seven-story office building in the CBD, but, a year after it opened, two floors still remain vacant.
"A lot of people have secured outside the CBD, fit-outs are expensive and the rents are more, everyone works on margins, and obviously for some businesses it is too much."
Empty lots of land around the city due to delayed anchor projects were putting some tenants off coming back into the city, he said.
But, according to the Colliers report, the drift back into the city centre is expected to continue for some time yet.