Bernard Hickey has a blog post on how office rentals in Wellington have increased by 14% in the last year. This is around four times the rate of inflation and well above the rate of increase in Auckland. Why?
[Wellington] office vacancy rates are around historic lows. Encouragingly, vacancies are low across the board with the prime and secondary vacancy rate at 1.4% and 3.5%, although some low quality buildings are struggling to find new tenants after being vacated by large government occupiers.
Bernard explains this means they are going from $197 a square metre buildings into $330 a square metre ones.
This is not a one off either, rents have gone up a staggering 66% in the last five years. Why? Because of the massive growth in the public service.
There are few people who qualify better for the label rich prick, than Wellington commercial property owners. And one of them told me a few months ago that since Labour came to power he had made $400 million just in Wellington. Yes $400 million. He said it was almost enough to make him vote Labour!
The sad thing is these massive profits have not just come from the taxpayer, but all business owners in Wellington are getting clobbered as rentals keep increasing.
I suspect there is also a flow on effect to the costs of residential tenancies in the inner city as property owners can convert from business to residential and vice versa.