Auckland CBD Office Market Snapshot Q3 2019
Despite an overall softening of underlying economic fundamentals, occupier demand has remained stable in 3Q.
Despite an overall softening of underlying economic fundamentals, occupier demand has remained stable in 3Q. Large prime vacancies remain few and far between, with occupiers opting to sit tight until backfill opportunities are presented in 2020. The delay of Commercial Bay has created demand for temporary office accommodation, although the impact of this will be short-lived.
Vacancy is forecast to tick up with the delivery of 39,000 sqm in the new PwC Tower next year, which is expected to primarily impact secondary stock as occupiers are presented with long-awaited backfill options in the prime market.
Outside of minor refurbishment work, the stock base remained static. With no large project deliveries earmarked for 4Q, this is expected to remain the case until the New PwC Tower reaches practical completion. In addition to this, no new large projects were announced in 3Q19, ensuring the supply pipeline remains comparatively balanced relative to demand for now.
A handful of trophy projects remain in various stages of planning or consenting, including the significant amount of commercial space proposed above the new Aotea CRL Station, and several more new builds in Wynyard Quarter.
The average prime rental rate saw some uplift in 3Q, underpinned primarily by an upward shift in the higher end of the A grade rental range. This puts the prime average rent (Premium + A grade) at just under $500 psm.
The transaction market continued to tick over in 3Q19, with a handful of sales over the $5 million threshold recorded. Yield compression resumed after a period of inactivity. The average prime yield shifted downward 25 bps to 5.0%, followed closely by secondary yields dropping 37 bps to 6.13%.