Corridor Office Market
Snapshot Q4 2019
The Southern Corridor remains the most affordable of the suburban office markets with yields continuing to track downward over 4Q19.
A trend of strong and stable demand continued in the Southern Corridor, following that set by the rest of the fringe and suburban markets this half. Our 2H19 vacancy survey noted that vacancy in the Southern Corridor reduced 0.6% to 9.4% from 10.0% in 1H19. The lower cost of occupying space, availability of good quality supply and limited options in the CBD core continue to drive tenant interest in fringe and suburban office markets, and the comparably more affordable space in Southern Corridor markets is no exception.
Completion of new supply in the suburban markets has continued to be few and far between, with much of the action remaining limited to the CBD and fringe markets. This was especially true in the Southern Corridor markets this quarter, as the total stock fell from 185,899 sqm in 1H19 to 183,130 sqm in 2H19 due to a number of projects entering the development pipeline for refurbishment. These included 1,711 sqm of space at 666 Great South Road, and 800 sqm at 7 Owen Road. Refurbishment activity is expected to continue across the suburban areas in the coming quarters.
The Southern Corridor remains the most affordable of the suburban office markets. The market showed an average rental rate of $273 per sqm this quarter, reflecting a range of $220 – $325 per sqm, and remaining stable at 3Q19 levels.
As with Auckland’s other suburban markets, yields continued to track downward over 4Q19. The average overall Southern Corridor yield firmed to 6.25%, reflecting a range of 5.75% - 6.75%. A number of factors including steady rental growth and minimal vacancy drove yield compression. No sales over $5 million were recorded this quarter for the Southern Corridor markets, with only a small number of sales over that mark recorded in the suburban markets overall.