- Auckland CBD’s overall vacancy rate increased to 8.8% in December 2020, up from the record-low 4.7% registered just 12-months prior. The increase reflects a combination of the impact of COVID-19 and the addition of over 54,000 sqm of new prime graded stock. The latter primarily responsible for prime grade vacancy almost doubling to sit at 6.8%, up from 3.5% recorded in June 2020, whilst secondary grade vacancy increased from 8.5% in June 2020 to 10.6%.
- The completion of 136 Fanshawe Street will bring the current round of major development to a close. However, new projects look likely to commence sooner than may have been expected given the impact of COVID-19. Asset Plus is planning the redevelopment of 35 Graham Street which it expects to complete in early 2024. This could add some 25,800 sqm of prime grade space to the CBD’s inventory. Precinct Properties is also promoting the second phase of development at Wynyard Quarter citing a potential 2023 completion date. Plans are now in place to begin work for the redevelopment of 1 Queen Street later this year. The recently announced multi-use development at Aotea Square of some ~15,000 sqm of office space is earmarked to start in 2024.
- The introduction of new quality office developments and the availability of sub lease options within prime grade buildings has increased opportunities for companies to upgrade their accommodation. Global tech and business solutions provider NTT has secured the remaining space (1,400 sqm) within the Te Kupenga Building at 155 Fanshawe Street, bringing the new premium build to 100% occupancy. Insurance provider Tower will vacate its existing premises once development of new premium office building 136 Fanshawe Street completes in the later half of this year.
- Average net face rents are holding stable, with prime net face rents currently sitting at $512 per sqm and average secondary net face rents at $295 per sqm. Completion of new builds are expected to push prime face rents to circa $900 per sqm and higher in the coming year, but are likely to come heavily incentivised.
- After softening slightly in mid-2020, investment yields firmed over the second half of 2020 as competition to secure prime office assets with steady and reliable income streams intensified in the low interest rate environment. Precinct Properties recently sold its remaining 50% interest in ANZ Centre for $177.0 million representing an approximate yield in the low five per cent range.
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