Auckland North Shore Office Market Snapshot Q1 2019
North Shore office space saw an upward shift in demand, with vacancy decreasing in 2H18.
North Shore office space saw an upward shift in demand, with vacancy decreasing from 4.0% in 1H18 to 3.7% in 2H18. The North Shore office market maintained the lowest vacancy rate across all of the Auckland CBD fringe and suburban markets tracked. Demand may level off slightly in 2019 as new supply enters the CBD market and provides new options for occupiers. However, the underlying factors driving the popularity of the North Shore will help mitigate any major reshuffle to alternative localities.
Total stock has seen no noticeable change since 2H17, however there are a number of projects in the pipeline. 55 Corinthian Drive in Albany is a five green-star mixed use building expected to deliver ~5,400 sqm of much needed office space by early to mid-2020, helping alleviate pent up demand.
Supply will continue to be led by the level of occupier demand, with development remaining focused in Albany where there is more greenfield land available. However, developers are facing multiple issues such as construction cost inflation, rising land values and a shortage of labour, acting to dampen a supply response.
Both upper and lower range rents in the Takapuna office market saw an increase of $10 over the last quarter to $390 psm and $255 psm respectively. However, we forecast these to fall back in the following year due to competition from developments being delivered in the CBD and fringe markets and demand being largely satisfied this cycle.
Yields remained relatively flat with both upper and lower range rates following the last quarter at 5.90% and 7.10% respectively, reflecting an average yield of 6.50%. We expect yields to firm further on the upper end as investor interest remains strong for quality stock. At the same time, we expect the yield range to widen as investors become increasingly discerning when evaluating secondary stock.