I was walking along Courtenay Place back to my office off Cuba Street the other day after I’d visited a building where the strengthening had just been finished and I realised how much building strengthening is going on and is to be done.
Several other buildings I walked past had builders in them working on them and as I moved into Ghuznee and Cuba Streets I noticed how many buildings had yellow stickers, indicating they would be being worked on soon.
After Christchurch and our quakes last year the landscape has really changed for commercial property ownership. Where some property owners had perhaps been quick to dismiss council warnings about the need to strengthen and had grumpily said that it would cost them a lot but they couldn’t increase rents to recover it, now they are finding they are losing tenants or can’t get as much rent if their building doesn’t have a good enough rating. Businesses have got pickier about the buildings they’ll put their people into. And as a commercial building is valued by the market based on it’s rental yield, it’s important to be able to get good tenants.
Like many others in the same boat the owners of the building I visited had taken the opportunity to give the building a spruce up. The tenants were enjoying their smart new premises after the months of disruption.
Unfortunately once you get into the strengthening there are no tax breaks, the costs are not tax deductible, they are a capital cost. And you can’t recover it over time as a depreciation claim any more. The owners just have to face it as an additional cost of the building.
Even though you may think the buildings have a lot of value, not all owners have access to funds to meet these costs; Think of owners of apartments in Bodycorps who are unable to borrow against the cost of their property as, until the strengthening is done, they have a much lower value.
So while we might not be seeing cranes on the skyline with construction here in Wellington there’s plenty of activity being done and to be done in our existing commercial buildings. Let’s hope it contributes some growth to the economy with higher quality apartments, office spaces and retails spaces. And that the yields from the improved buildings reflect the stresses and costs of the process