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News Release


Vacancy tight across New Zealand’s office skylines

JLL has released the 10th edition of their Vertical Vacancy Review



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

​JLL has released their Q2 2018 Vertical Vacancy Review looking at prime office vacancy on a building by building, floor by floor basis across the Auckland, Wellington and Christchurch markets. The report covers over 70 of the best office buildings in New Zealand's main centres.

In Auckland's core CBD, vacancy rose marginally across the skyline from 5.8 per cent to 6.2 per cent.

JLL Head of Research, Tom Barclay says, "The increase in vacancy was largely due to the inclusion of 125Q, which has a substantial amount of space yet to be let. The four premium towers of PwC, Lumley, Vero and ANZ are still showing very low levels of vacancy at only 3.2 per cent, although some space has freed up in Vero. The balance of the skyline which is made of the Grade A towers has a vacancy rate of 7.4 per cent which is somewhat skewed by 125Q and Citigroup Centre, which have the most space available for lease. Apart from these buildings the prime market is as tight as ever."

In Wynyard Quarter performance has improved with vacancy dropping from 4.6 per cent to 3.9 per cent. The campus style set up of the area continues to grow in popularity with the tech sector and larger footprint corporates. New supply in the pipeline to be delivered post 2020 follows this trend and includes Mansons One 55 development on Fanshawe Street, which will provide over 17,000 sqm of grade-A space, and the second stage of Precinct's innovation precinct at 10 Madden Street at over 8,000 sqm.

"The occupier breakdown of the Wynyard Quarter area speaks to its reputation as a tech hub with 32.4 per cent of the occupiers in our analysed buildings being in the IT, media and telecommunications industries, followed by 23.8 per cent which are financial services," says Barclay.

With minimal vacancy minimal across the skylines of Auckland's two major office precincts, prime rents have continued to grow. The average prime rent sits at $490 psm (net) as at March.

"We are expecting the average prime rent to reach the $500 psm mark by the end of 2018," says Barclay.

While upper end premium rents in Auckland are approaching the $700 psm mark, this is still relatively affordable by global standards. JLL's Premium Office Rental Tracker looks at 58 prime office markets around the world and ranks them based on affordability. Auckland has been included for the first time this year and slotted in at sixth place in terms of affordability, in-between Brussels and Bangkok. Johannesburg, Kuala Lumpur and Manila were the most affordable markets global markets, while unsurprisingly, the least affordable markets were Hong Kong, Beijing, London and New York.

"On the investment side of the market, the weight of offshore capital seeking exposure to Auckland office assets continues to drive yields lower. The average prime yield has now broken through the 6.0 per cent mark for the first time in our series to reach 5.98 per cent. We expect to see further compression over 2018," explains Barclay.

The Wellington skyline remains the tightest in New Zealand with vacancy virtually non-existent. The vacancy rate is only 0.3 per cent and was contained to a few partial floors in the Majestic Centre at the time of surveying.

JLL Senior Consultant Chris McCashin says, "We expect some easing in conditions upon completion of 20 Customhouse Quay and the Kumutoto precinct while the expansion at Bowen Campus will also add some much needed capacity. Space that is required to be backfilled as this new stock comes online will be quickly absorbed due to the pent up demand that exists under the current market conditions."

The Christchurch market has turned a corner with vacancy dropping from 12.4 per cent to 6.8 per cent across the prime office buildings. While the CBD is starting to fill up, this has come at the expense of the suburbs where vacancy continues to rise. The average prime rental continues to plateau, unchanged at $355 psm (net) since the end of 2016. Over the same period the average prime suburban rent has continued to fall from $283 psm to reaching $260 psm as at March.

The CBD occupier market is dominated by professional services (31.3 per cent), the public sector (23.6 per cent) and financial services (19.0 per cent).

The end of the post-quake office development pipeline continues to edge closer with only two major projects outstanding – the Spark office building opposite Cathedral Square and the office component of 376 Montreal Street, which will also house a Sudima hotel.

"The turnaround in the Christchurch market has been a long time coming with the city having to sustain a number of years of double digit vacancies. The growing office worker population will go some way towards sustaining the influx of new retail amenity," explains Barclay.