Auckland's newly opened City Rail Link is set to give the core CBD office market its strongest demand boost in a decade, as return-to-office momentum combines with a step change in public transport accessibility, according to new CBRE research.
The ‘Real Estate Impacts of the City Rail Link’ report outlines how improved accessibility as a result of the CRL will influence land use, property values and new development in Midtown Auckland.
Tamba Carleton, CBRE research director and the report's author, said the real estate impacts extend well beyond faster commutes, with the CRL recalibrating accessibility across the Auckland region.
“Accessibility is a primary influence on land use, property values and the spatial pattern of new development. For prime CBD office space, we expect to see absorption, a flight to connectivity and rental recovery.
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"In the secondary office market there will be some bifurcation, where redeveloped assets will benefit from increased demand and others may face obsolescence.”
Campbell Pritchard, national director of office leasing at CBRE New Zealand, said that while the benefits of the CRL won't be uniform, Midtown will become a renewed centre of activity, particularly around Te Waihorotiu Station.
“Fanning out from the station entrances, the CRL will have a positive impact on vibrancy and amenity. This is a great opportunity for landlords to redevelop and reposition office space close to the stations.”
Among the new and recent leasing offerings in buildings near the new stations are PAG’s Mosaic, a refurbished 17-level office building on Wakefield Street; Quattro Alberts’ repositioning of Bledisloe House beside Te Waihorotiu Station and Roxy-Pacific’s redevelopment of the twin towers at 205-209 Queen Street.
“There has already been a notable push to upgrade A and B-grade buildings near the CRL stations and turn them into attractive leasing propositions. This activity is expected to ramp up now that the CRL is open,” Pritchard said.
With little space left in the premium and A-grade waterfront buildings that have dominated demand in recent years, occupiers considering office space near the CRL stations could benefit from moving early.
“There will be some first-mover advantage. Occupiers who jump on the opportunities first may secure some strong deals in their favour, before the market swings towards landlords as vacancy is absorbed and the benefit of being close to the stations is proven.”
Brent McGregor, executive chairman of capital markets at CBRE New Zealand, said the CBRE-brokered sale of 99 Albert Street to Mainland Capital, on the doorstep of Te Waihorotiu Station, further illustrated the CRL effect already flowing through to the investment market.
“The imminent opening of the station made a significant difference to the breadth and depth of bids we received. The interest in this asset included three different use proposals for the building, with capital from private investors, offshore and domestic institutions and private equity.
"This demonstrated a high level of buyer interest which is attributable in large part to the CRL,” he said.
“The real proof of the location will be in the leasing activity. Once we have a critical mass of occupiers who put their stake in the ground and vouch for the midtown area, more investors will follow and we're excited to see the evolution of the district as investment activity increases.”
Quattro Alberts' early refurbishment of Midtown buildings has been rewarded, with its Formery by Alberts development (across the street from a Te Waihorotiu Station entrance) fully leased.
Mark Gedye, managing director of Quattro Alberts, said the success of Formery by Alberts is proof of the demand for a new kind of Midtown workplace.
“Every floor we’ve developed is fully leased, totalling 10,000 square metres, and we’re now accelerating the next floors to keep pace. 30 per cent of our tenants at Formery have come from fringe locations and the CRL has been a significant factor in their decisions.”
The company’s refurbished space in the 13,000sq m Bledisloe House has also attracted strong enquiry and is 20% leased, he said.
“We invested in Midtown well before the CRL opened because we could visualise the opportunity created by the combination of better accessibility and the public and private investment happening across the precinct.”
Quattro aims to ‘upcycle’ existing buildings into spaces that give staff a reason to come into the office, with great design, hospitality, wellness, amenity and community all becoming key considerations.
“As the CRL opens up midtown to more of Auckland, we expect that ‘flight to experience’ to accelerate, with an anticipated 60 tenancies pulling in hundreds of office workers just from Bledisloe House alone once fully leased.
"The buildings that combine great connectivity with a genuinely compelling workplace experience will be the ones that benefit most.”
- Supplied by CBRE
