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News Release

Auckland

Office vacancy tight in Auckland and Wellington while Christchurch enjoys more choice

JLL releases Vertical Vacancy Review for Q4 2017


 

 

East Tamaki gem with new five-year lease/new-zealand/en-gb/news/863/east-tamaki-gem-with-new-five-year-leaseAucklandEast Tamaki gem with new five-year lease
Rare vacant land in Grey Lynn for sale/new-zealand/en-gb/news/861/rare-vacant-land-in-grey-lynn-for-saleAucklandRare vacant land in Grey Lynn for sale

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Auckland night 2.jpgThe JLL Research and Consulting team has conducted a building by building, floor by floor research survey in New Zealand's three major cities Auckland, Wellington and Christchurch to produce the Vertical Vacancy Review (VVR) for the fourth quarter of 2017.

This report provides a clear indication of tenant movements and availability of space in office towers and therefore, shows trends as to which locations and properties are popular at this point in the cycle.

JLL Associate Director of Research and Consulting, Tom Barclay says, "This report is designed to give building owners, tenants and developers an indication of how each marking is performing, this in turn helps them to plan for the future."

In the Auckland market, some of the key outtakes of the recent report is the popularity and growth of Wynyard Quarter and the Viaduct Harbour Precinct, which has seen a reduction in skyline vacancy from 5.7% to 4.6%.

"This area of Auckland is now home to an increasing proportion of Auckland's 1,000 sqm plus tenants, who cannot find suitable space in Auckland's core CBD. Wynyard Quarter in particular has been the focus of A-grade office development and will continue to hold this position for the foreseeable future given the amount of developable land.

"Technology and communications make up a large proportion of occupiers in the area, making up 38% of total occupiers across the surveyed building. Professional services also have a relatively high presence at 25%," says Barclay.

Wynyard Quarter is still in construction mode, with further development set to take place on the former Caltex site on Fanshawe Street, which will see another Manson's office development along the second stage of Precincts Innovation hub, due for completion in 2019. 46 Sale Street, which will be the new home of the AA in early 2018, is nearing completion.

"What we are seeing are a number of head offices taking up residence in Wynyard Quarter with Auckland Transport, Datacom and soon the AA, all relocating there. The area is close to the CBD and a walkable distance to the Britomart station and Ferry Terminus, plus it has great access to the Northern Motorway," explains Barclay.

In contrast to Wynyard Quarter, Auckland CBD has seen core vacancy increase from 2.4% to 5.8%. This has come about as a result of availability in A-grade buildings, while the four premium towers remain incredibly tight.

"In the core CBD market, a number of refurbishments are planned or underway including 82 Wyndham Street, 131 Queen Street and 54 Cook Street," says Barclay.

With secondary vacancy in the wider market increasing due to tenants moving up into higher quality new supply, landlords are taking the opportunity to upgrade older buildings and capture occupier demand for better quality stock and refurbished character space.

While refurbishments are a common feature, Barclay believes that the increasing conversionary activity is also due to tenant flight up the grade spectrum to higher quality space. "With office tenant demand skewed towards the waterfront, the city fringe and non-core locations with University influence, will be considered for conversion to student accommodation, hotel or apartment uses to achieve superior long term returns.

Wellington

Following the earthquake in November 2016, the Wellington office market continues to experience critically low vacancy levels across the top end of the market. Prime office vacancy levels have dropped from 2.8% to a mere 0.4%.

JLL Senior Research Consultant Chris McCashin says, "Vacancy in prime buildings is almost non-existent, with virtually no supply over 500sqm available. However, new supply is just around the corner and will relieve some pent up demand with 17,000sqm at 20 Customhouse Quay to come online and another 10,000sqm in the new PwC building.

"There are also a number of substantial properties on the market for sale, which will test the depth of the buyer pool and investor resilience."

One property that is currently under redevelopment is Bowen Campus, which will also have potential for future extensions. Precinct Properties current move is to redevelop the property from 26,000qm to 38,000sqm, which will allow some much needed capacity.

A number of other sites in the city have also been earmarked for development. These include the Z service station site, Bob Jones' 'timber tower', the proposed Parliamentary services building and another waterfront building which is pegged to be developed by Willis Bond & Co.

"The sites that have been earmarked for development essentially provide some back up relief for the city, as predicting supply in the current market is difficult due to the future of some buildings still being unknown.

"In fact, the day our VVR report went to print it was announced that the Statistics building is going to be demolished, which could also be the fate of other earthquake damaged buildings in city," says McCashin.

Christchurch

Unlike Wellington, the Christchurch market has ample supply with the prime skyline vacancy sitting at 12.1%, although this is a considerable decrease for the city which formerly saw vacancy as high as 17.6% across the skyline.

Barclay explains that the Christchurch market has passed the high tide mark with the gaps slowly being plugged. "We are nearing the end of the first post-quake development cycle only a handful of major projects were to be completed with Westpac/KPMG office and the Spark building being the two major projects office projects yet to be delivered. Further new development is unlikely over the next few years unless a major anchor tenant, like Spark, can be found."

While the CBD market is slowly starting to fill up, this is at the expense of the suburban market which continues to see a rise in vacancy. In the CBD, this is having a positive impact on the retail market as the increased office worker population is leading to a more diverse retail offering.

In contrast to the Auckland market, demand is higher in Christchurch for smaller tenancies of 500sqm or less. The current occupier split is dominated by financial services (31%), public sector (26%) and professional services (17%).

"Due to the choice available it is common for incentives to be offered to attract tenants, making it is a great time to be an occupier looking for space in Christchurch. Incentives such as rent free periods or contributions to fit out costs are often on the table and will remain in place until supply tightens further, until vacancy is well below the 10% threshold," says Barclay.