Snapshot Q4 2019
Occupier demand remains strong despite some
rental uplift in the prime markets and the overall vacancy forecast to rise.
Occupier demand remains strong, particularly for the premium and A grade buildings in the CBD. The combined vacancy level for the CBD Core and Viaduct have remained stable at 5.2% throughout 2019 equating to ~63,600 sqm of stock. While the CBD Core has seen a slight increase in vacancy, the Viaduct has hit a record low of 1.4%.
Overall vacancy is forecast to rise with the completion of the much anticipated new PwC tower with 39,000 sqm of office space in Commercial Bay which is due in April 2020. The delivery of this building will impact the secondary market as backfill space in the prime buildings will be quickly filled.
Throughout 2019, supply of office stock in the CBD remained relatively stable, ending the year at a total stock level of 1.22 million sqm of lettable space. This is only a ~1,600sqm change from 2H18. There were no major development project completions over the last half of 2019 and this will be the case until the new PwC tower comes online.
With a few trophy assets moving slowly through the pipeline in various stages of planning, Auckland will see the trickling of new space in the medium term of these projects including a large amount of commercial space proposed above the new Aotea CRL Station and a few new builds in Fanshawe Street.
This quarter saw some rental uplift in the prime markets supported by an uptick in the A grade rental range. This brings the average prime rent to $502 psm while secondary rents held firm at $296 psm.
Yield compression was seen in the secondary market with a stabilisation in the prime market. Average prime yields remain at 5.00% with secondary shifting downwards to 5.88% from 6.13% last quarter.