Auckland CBD office
market snapshot 2Q20
Overall vacancy in the CBD oﬀice property market increased to 8.1%, representing just over 101,000 sqm of unoccupied space. Included in the 1H20 survey figures are the completion of the 39,000 sqm Commercial Bay oﬀice tower (92% leased at the time of survey). The main adjustment in occupancy during 1H20 was seen in lower grade oﬀice buildings. We expect occupancy within prime oﬀice buildings to normalise over the coming months. Occupancy within lower grade buildings is expected to face challenges in an increasingly competitive market though.
Completion of Commercial Bay provided an additional 39,000 sqm of premium stock into the Auckland CBD oﬀice market, ending 1H20 at a total stock level of 1.26 million sqm of space. That said, Commercial Bay was 92% leased at time of opening. Other notable developments currently underway include 10 Madden Street (8,000 sqm), One55 Fanshawe (16,000 sqm) and 136 Fanshawe (20,000 sqm). All these developments have a high pre-commitment rate. Completion for these developments is expected to push out slightly, given the delays during COVID lock-down.
Prime net face rents have steadily increased to $518 per sqm during 2Q20 supported by the opening of Commercial Bay. The impact of this increase has been countered to a noticeable degree by increases in average incentive levels, however. Secondary net face rents have decreased to $270 per sqm during 2Q20 with increased incentive levels. Yields have pushed out slightly over the quarter as investors take a wait-and-see stance with investment decisions. Both prime and secondary CBD oﬀice yields increased by 19 bps to an average of 4.94% and 5.81% respectively in 2Q20.