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Auckland

Auckland Office Vacancy Reaches New Low but Outlook to Soften


 

 

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​​Recent vacancy data from JLL shows vacancy in the CBD office market is at December 2007 levels, however new supply is likely to push vacancy up in the near term. 

JLL’s most recent Auckland office vacancy survey shows office vacancy has continued to fall as the CBD reaches yet another new threshold for vacancy within the central business district. 

Vacancy in Auckland’s central office stock, which includes the Viaduct, reached 5.3% in June moving past the 5.8% record reached six months earlier in December 2014.

Justin Kean, JLL’s Director of Research and Consulting says, “The supply gap in office stock, which resulted from the lull in construction post GFC, is continuing to cast a shadow over the Auckland office market. This low level of supply is now being matched with very strong demand growth meaning vacancy has reached the previous cyclical low set in December 2007.”

The 5.3% vacancy rate in the central office market comprises 6.0% in the CBD core, also matching the previous low set in December 2007, with vacancy in the Viaduct now sitting at 1.8%.  

Premium and Grade A vacancy has continued to stay at very low levels with Premium Vacancy at 1.4% of total stock whilst Grade A is at 2.0%. Significant movement in the recent survey was seen in secondary stock however. 

Grade B vacancy moved down 6.4% to 4.1%, also a new historic low and Grade C office moved from 11.4% to 9.4%. Kean continues, “There has always been a clear preference for better quality stock in the CBD office market however Premium and Grade A stock is now so tight we are seeing firms having no choice but to take up space in Grade B & C buildings as they face pressure to house growing workforces.”

JLL notes that the June 2015 vacancy rate of 5.3% may well be the lowest point that vacancy gets to in the current cycle. Vacancy is anticipated to soften over the next 12 months as new supply comes on line and tenants begin to leave behind voids across the city. 

James Thorburn, Commercial Broker at JLL says, “We are seeing the reintroduction of refurbished stock into the CBD market in the second half of 2015 including 125 Queen Street and 22 Fanshawe Street. These buildings, aimed at mid-market tenants, will add to available supply around the same time as Goodman completes Fonterra’s headquarters in the Viaduct, their new build office VXV3 and 151 Victoria Street fills up causing a loss of tenants from other areas of the CBD.”

Although JLL does not see completions in the next 12-18 months as having a long term detrimental effect on the office market in the CBD, JLL does view the long term supply scenario in a different light. 

Kean concludes, “Recent announcements such as Manson’s proposal to develop a tower on the NZME site and Datacom’s move to the Wynyard quarter have inflated the potential pipeline. This adds to a current pipeline which includes Precinct’s Downtown development, additional mid-rise development in the Wynyard Quarter as well as several smaller speculative developments being proposed in the CBD Fringe. Collectively this supply pipeline has the potential to push vacancy up to elevated levels through 2018 and 2019.”