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News Release


Positive news from the markets

A prominent trend of office property refurbishments in the Auckland and Wellington CBDs “primarily funded by motivated landlords”, has been noted by Jones Lang LaSalle in a newly released commercial property market commentary.



Long term investment with development potential/new-zealand/en-gb/news/916/long-term-investment-with-development-potentialAUCKLANDLong term investment with development potential
Former Fire Station on high profile corner site/new-zealand/en-gb/news/915/former-fire-station-on-high-profile-corner-siteCHRISTCHURCHFormer Fire Station on high profile corner site

​It says around 12,000sqm of space is being renovated in Auckland and another 14,000sqm in Wellington – mostly in C and D grade properties. The agency’s national director of office leasing, Mark Grant, says that with a slowdown in new office developments in the Auckland CBD, landlords are competing for quality tenants and working to retain existing tenants “through a clear trend for high-level office refurbishments”. He says tenants need to think early about securing options for the best space – while landlords must look at the options on maximizing their space to attract the best tenants.

The report says only one significant new Auckland CBD office project is due to be completed this year (the AECOM building in Mahuhu Crescent with an NLA of 12,155sqm of which a little more than half is at present uncommitted) though strong development continues in the CBD fringe. It says the city’s rentals are “for the most part” increasing and there’s been a marginal firming of yields in the last six months. JLL puts Auckland’s CBD office vacancy level down to 11.2% - amounting to about 112,000sqm of space. By comparison, Wellington is said to have 126,500sqm vacant, equivalent to 10.4%. The research says the Wellington market remains concerned with the contraction in demand for office space by the Government – coupled with the city’s earthquake risk. Those issues have seen rental rates either plateau or fall but that said it’s noted that secondary yields have not softened “indicating that the market is becoming more comfortable with current conditions”.

The industrial sector
Investors continue to see industrial property investment as a safe option that provides solid returns with little long-term volatility, the report suggests.
Both the Auckland and Wellington markets are assessed as showing “solid demand fundamentals” in the first half of the year with an overall vacancy rate for the Auckland region of 5.2% and a slight drop to 6% in Wellington. Sam Smith, JLL’s director of industrial sales and leasing, says in both regions tenants are looking to new-build premises to take advantage of the efficiencies
that modern buildings offer. “In Auckland this is especially noticeable for distribution facilities in popular precincts such as Highbrook and the Airport... though properties in areas such as Mt Wellington and Penrose still remain popular.”
Smith also notes that the amount of quality stock on offer to buyers remains low. Steady rental levels are reported for the last six months. “Given strengthening demand for high quality premises in both locations we expect to see steady increase in prime industrial rentals in the near-term with slower
growth in secondary rental rates.”
Also reported is strong interest in high quality Auckland industrial property in the under $2 million market, though Wellington sales have been more infrequent.
Average prime industrial yields in Auckland are put at 7.75% and in Wellington at 9.25%; secondary yields are respectively 8.75% and 10.5%. “The projected increase in rents over the next few years will likely see yields firm at the top end.”
The retail property market

The old adage of “location-location” seems to apply to the Wellington CBD retail sector with JLL noting that prime retail space in Wellington – which is tightly held in any event – is now down at a vacancy level of just 2.1%, its lowest level in five years. But the southern part of the capital’s CBD has shown a marginally increased vacancy level of 6.6% - “highlighting retailers’ preference for prime locations in times of limited retail growth”.
In Auckland, retail vacancy levels rose to 6.5% in the first half of the year though JLL says it does not see this as a trend “but rather a result of specific properties entering the marketplace vacant”. It adds it expects this space will receive “sufficient enquiry” in the coming months.
Noted too is limited retail development underway in the Auckland CBD – much of that in small-scale tenancies – and the near completion of the Britomart
In Wellington work has started on a multi-million dollar redevelopment of the Lambton Square Shopping Centre, while the food court redevelopment on the
ground floor at 100 Tory St is largely complete. The researchers say average prime retail rents have remained stable in both centres so far this year though
Opex increased between $3 and $5/sqm – not least because of increasing insurance costs.
Prime Auckland retail yields are reported firming at 7.38% in the first half of 2012 with a comment that retail property transactions in the wider region have
provided “some spectacular results in recent months with low interest rates coupled with trophy properties providing evidence of investors’ ability to move to sub- 6% in the right purchasing situation”.