Metropolitan office vacancy at 6.3 per cent, well below 10-year average
Strong growth in Auckland’s metropolitan office market has been boosted by record low vacancy rates in the CBD, the latest Colliers International report has found.
The annual Auckland Metropolitan Office Research Report, released today, shows only 6.3 per cent of office space outside the CBD is vacant – well below the 10-year average of 8.2 per cent.
Colliers International Research Manager Leo Lee says the biggest driving factor is the shortage of prime office space in the CBD.
“With record low office vacancy rates continuing, it is becoming hard for businesses to find quality affordable space in the central city,” he says.
“Spill over demand is driving strong growth in the metropolitan office market, particularly in areas close to good transport hubs and amenities, such as the Southern Corridor or the North Shore’s Smales Farm.
“As a result, metropolitan vacancies rates remain low, while rents are rising.”
Lee says changing tenant needs are also helping to drive growth in the metropolitan market.
“Companies are putting a greater emphasis on attracting and retaining staff through quality workplaces,” he says.
“The need to provide more collaborative and connected workplaces is creating demand for large contiguous floor plates, which are very hard to come by in the CBD.
“Companies are also looking to create efficiencies by housing all of their employees in one building, rather than across a number of floors or locations.”
Lee cites the Millennium Business Centre in Greenlane, on the Southern Corridor, and the Mercury building, under construction in Newmarket, as prime examples of these trends.
“Both of these significant developments have been sold to syndications – another key trend during the last year due to the low interest rate environment,” he says.
“Until debt costs and alternative asset returns rise significantly, syndicators will continue to be active.”
Lee says it is noteworthy that last year’s $210m sale of the Millennium Business Centre to Oyster Group, brokered by Colliers International’s Capital Markets team, was the largest office sale in New Zealand.
“That shows just how buoyant the metropolitan market is.”
Auckland’s underlying economic strength continues to be the driver of overall demand in the office market, Lee says.
“Auckland is the economic powerhouse of New Zealand, contributing 37 per cent GDP,” he says.
“Growth in population and employment, as well as increased construction activity, brings new challenges, but will also help to keep vacancy low and rents buoyant over the next 12 months.”
The Colliers International research report shows only 108,000sq m of metropolitan office space remains available in Auckland.
Some 29,300sq m of new prime office stock was completed in the last six months.
A further 65,686sq m is under construction, while 29,200sq m is proposed for future development.
In-depth figures and further market commentary are available in the full Auckland Metropolitan Office Research Report.
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