Snapshots

Auckland CBD office market snapshot Q1 2021

With the 'flight to quality' trend continuing, prime office vacancies decreased 86bps over Q4, meanwhile secondary vacancies increased substantially by 266bps.

February 24, 2021
Demand

Our 2H20 survey results indicate overall vacancy in the CBD office market has risen by 98 bps to 9.0%. With the 'flight to quality' trend continuing, prime vacancies decreased 86bps over the quarter to 4.0%, meanwhile secondary vacancies increased substantially by 266bps to 13.8%. High amounts of sublease space (~80,000 sqm now being offered formally and informally) is offering occupiers a range of options and an opportunity to move up the grade scale. With demand for premium office space for lease likely to remain, we expect A-grade and secondary office space to face increased competition in 2021/22 due to additional supply and sublease availability.

Supply

There were several significant completions and withdrawals in 2H20, leading to a net decline in stock of 23,680 sqm. The completion of One55 Fanshawe (15,500 sqm, with 90% precommitment), 246 Queen (6,100 sqm, no pre-commitment), and the partial completion of 1 Albert added to increases in stock. Meanwhile, the long-planned withdrawal of 1 Queen contributed to a total of ~46,000 sqm of removals. Other notable developments currently underway include 10 Madden Street (7,900 sqm, 100% pre-committed) and 136-142 Fanshawe Street (20,000 sqm, 70% pre-committed), both of which will provide additional A-grade space.

Asset performance

As at 4Q20, both prime and secondary net face rents have remained static at $516 psm and $262 psm respectively with a balance of evidence showing no obvious downward (or upward) rental trend. Similarly, average incentive levels have also remained at 3Q20 levels at 14.6% and 19.4% respectively for prime and secondary office space. Meanwhile, supported by a lower return environment globally coupled with lower borrowing costs, prime CBD office yields firmed 19bps to 4.69% while secondary CBD office yields also firmed 13bps to 5.88% during 4Q20.

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