The weakening economy and tougher financial climate is taking its toll on Auckland's metropolitan office market, according to Colliers International's latest market indicators report.
The annual report, which was launched at a Colliers ‘Research Meets The Road’ event in Auckland last night, reveals that vacancy levels have increased everywhere across city fringe, southern corridor and North Shore areas of the city as the market enters a period of consolidation.
Between June 08 and December 08:
· City fringe vacancy increased from 5.3% to 6.3%
· Southern corridor vacancy increased from 4.8% to 5.6%
· North Shore vacancy increased from 9.2% to 11.2%
The North Shore market is particularly under pressure, with high vacancy in some precincts, largely due to the impact of the credit crisis and the ensuing contraction of the economy.
The report also shows that:
· The development tap has been switched off. Only 46,000sqm of office space is under construction in the metropolitan areas, out of potential 160,000sqm that could be underway
· Face rents are generally static, but when increasing incentives are taken into account (the capital contribution or rental holiday a landlord will pay to secure a tenant), effective rents are reducing, particularly for secondary quality space.
· Capital values have fallen, as cap rates have softened, reflecting reduced investment demand and static rentals.
Alan McMahon, Research Director for Colliers international, said: “Overall, market indicators point towards a slow year for the Auckland metropolitan markets. Softening leasing enquiry, rising vacancy and negative absorption will result in a weak market and static rents.”
Click here to read the full report in PDF format.
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