Auckland North Shore office market snapshot Q3 2020
Our 1H20 vacancy survey revealed that vacancy rose 0.5% in Albany to 4.2%. In Takapuna, vacancy fell slightly to 2.9% from 3.0% last half. Tenants in the suburban markets have been noticeably more affected by COVID-19, especially those in the tourism or international education sector, as well as SME companies. Looking forward for the rest of 2020, vacancy within the lower grade buildings is expected to trend upwards as SME businesses face higher cashflow issues with the wage subsidy now come to an end.
We did not record any completions within our latest 2Q20 vacancy survey. The most notable project currently underway in the suburban market is the development at 55 Corinthian Drive in Albany (Apec Property Development Limited), with completion due this year. On completion, 55 Corinthian Drive will deliver 5,389 sqm of office space over four levels along with 820 sqm of retail space. Medium term developments, such as Auckland Council’s Munroe Lane (Asset Plus Limited), are likely to remain in early planning for the coming months under the current climate, awaiting further direction on market and economic movements.
Over 3Q20, average upper North Shore rents fell to $377 psm from $385 psm last half. Average lower North Shore rents also fell to $247 psm from $252 psm. While lower North Shore yields softened 13bps to 6.63% over the half, upper yields remained at 5.13%. Economic uncertainty and potential risks to income profiles have limited transaction activity in New Zealand overall. We have recorded only three significant transactions over 2020 thus far, most recently the $25,500,000 sale of 44 Taharoto Road, Takapuna, in June.