market snapshot 2Q20
Christchurch’s total vacancy has slightly decreased by 20 bps in the last six months, alongside modestly increasing net absorption. Over the last half, prime vacancy decreased by 40 bps, down to 4.9%, while secondary vacancy increased by 110 bps to 11.0%. As expected, the negative eﬀects of COVID-19 have been felt most accutely in the secondary oﬀice sector, consistent with trends in Auckland and Wellington. Meanwhile, there remains an active market for quality, prime oﬀice space in Christchurch with demand remaining strong over 1H20.
1H20 saw the largest half-year increase in stock since 1H18. It is also the first time in two years that net increase of oﬀice stock included additions from suburban stock which contributed 1,904 sqm to the total 8,705 sqm net completions, with the rest being in the CBD. Overall, however, the addition of new stock and the number of projects under construction have remained relatively small as compared to pre-2018 levels. This appears to continue the observed trend that supply has now slowed down to its 'next normal' pace with immediate post-2011 new build and quake proofing projects now complete.
Rents, yields, and capital values for both prime and secondary oﬀice space in Christchurch are consistent with 1Q20 averages. Prime rents in the CBD sit at $330 psm, while suburban stock sits at $213 psm. Meanwhile, yields average at 6.00% and 6.75% respectively and capital values sit at $5,500 per sqm and $3,148 per sqm. The fundamentals of Christchurch are currently finely balanced with rents and incentives reaching a sustainable equilibrium. Looking ahead, we expect the market for prime space to remain active alongside modest yield expansion.