Auckland CBD’s overall vacancy rate tightened once more to an all-time low of 5.0%, the lowest since we commenced the survey over 20 years ago. The prime vacancy rate fell to 2.8% and the secondary vacancy rate fell to 6.6% compared to 3.5% and 8.1% recorded respectively last year.
Some of the immediate supply constraints for selected high-end office premises of scale are expected to ease with the addition of approximately 63,000 sqm of new premium office stock when Commercial Bay, One 55 Fanshawe and 10 Madden Street complete next year However, spaces to lease will not suit every tenant meaning supply constraints in certain sectors and precincts are likely to remain.
Average net face rent for both prime and secondary buildings are increasing with the gap between the two decreasing. Secondary rents have increased by 7.1% over the past year, reducing the gap to just around $200 per sqm.
Average prime leasing incentives are rising marginally to counter vacancies occurring in some prime premises. Also influencing the average rate of incentives will be the completion of some new CBD premises that have high face rents, but net effective rents at market rates.
Investment activity remains buoyant for 2019 driven by strong market fundamentals and low interest rates. Notable transaction include the sale of Chorus House at 66 Wyndham Street which is likely to settle later this year. The property was sold to a US based investor for $144.5 million representing a yield in the low 5.0% range.