Auckland Office Southern Corridor Market Snapshot Q3 2019
The Southern Corridor was the only decentralised market to see rental growth in 3Q19. It recorded a 2.8% increase to place the average rental rate at $273 psm.
Demand
Demand remains for quality and accessible office accommodation outside of the CBD, with the Southern Corridor being no exception. The market remains steady with no large material change to conditions in 3Q19 and with leasing activity continuing to tick over. Price and availability of stock have remained the drivers of tenant demand, with competing decentralised markets recording tighter conditions and comparatively higher rental rates. The great opportunity for new built stock is also reportedly tempting some occupiers looking to relocate.
Supply
There are a handful of projects progressing well across the fringe and suburban markets. Within the Southern Corridor, this comprises the two new builds for Kimberly Trust on Marewa Road. Combined, the buildings are anticipated to deliver ~12,000 sqm of space, now expected to reach completion in 2H20.
JLL are also aware of a number of new build and refurbishment projects in planning, with most waiting to secure an anchor tenant or a pre-leasing threshold before pushing go on construction works. As a result, we expect to see additional projects commence in the mid-term.
Asset Performance
The Southern Corridor was the only decentralised market to see rental growth in 3Q19. It recorded a 2.8% increase to place the average rental rate at $273 psm. Growth was driven chiefly by stock in the top end of the market, with the upper end rental rate increasing by $15 to $325 psm. The lower end rate remained flat at $220 psm, reflecting the limited interest for inferior space.
Yields tracked downward over the same period, firming 25 bps to an average of 6.45%. A tightening of bank lending has become more problematic for those needing finance to secure purchases, however those with alternative funding arrangements are pouncing on good assets when available.
