Strong occupier demand for Auckland CBD office space was recorded in our latest December survey. The overall vacancy rate decreased to 4.7% compared to 5.0% in June 2019. The 4.7% represents less than 67,000 sq m of space available and is the lowest on record. Prime vacancy is at 2.5% and secondary vacancy is at 6.3%.
The strong supply response and occupier interest highlights market appetite for quality office space. There is approximately 86,500 sq m of prime office space currently under construction across 5 developments with over 70% of the 86,500 sq m of space is already pre-committed.
Telecommunications service provider 2 Degrees and law firm Meredith Connell have committed to space at 136 Fanshawe Street, a 20,000 sq m office development by Mansons TCLM expected to complete mid next year.
The squeeze on office space available underpinned strong market fundamentals for landlords. Average prime net face rents have increased to $495 per sq m, up from $487 per sq m recorded last year. Average prime yields firmed 40 basis points to 5.5% compared to 5.9% a year ago with expectations of further yield firming.
New Zealand is receiving solid interest from investors as the hunt for yield tightens in an extended low interest rate environment. The largest office deal for 2019 was the soon to be completed 155 Fanshawe Street which is being developed by Mansons TCLM. The building was sold to PAG Asia for approximately $236 million.
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