Auckland CBD Office Market Snapshot Q1 2019
Demand in the Auckland CBD Office sector remains elevated. Vacancies in large prime buildings have been maintained at low levels, however we have not undertaken a full vacancy update since 4Q18 (the next full update will be in 2Q19). Without a significant change in stock via additions or removals, we have not observed any significant material differences. As at 2H18, prime vacancy dropped to 4.7%, which was closely followed by secondary vacancy at 6.0%.
We forecast a slight moderation in vacancy rates as pressure is taken off as new developments reach completion, including Commercial Bay, anticipated to be delivered early 2Q20 delivering some 39,000 sqm.
No new stock was added over the last quarter, with supply remaining relatively static. However, several projects have progressed further through the development pipeline, including refurbishment works at 246 Queen Street and a crane being erected at 10 Madden Street.
Additionally, construction activity has commenced at Mansons’ 136-142 Fanshawe Street site, which is expected to deliver ~22,000 sqm of A-grade space into the market once complete.
Prime rents in the CBD Office market have seen a slight increase to $496 psm, after taking a brief pause. Secondary rents have been put to a standstill over the last quarter, after several periods of consecutive growth. Rental uplift is expected to regain upward momentum as new supply entering the market sets new rental benchmarks.
Yields saw minor drops in both the Prime and Secondary sectors, now sitting at 5.50% and 6.46% respectively. Transaction volumes slowed coming into 2019, with purchasing activity in New Zealand typically rising from the second quarter onwards.