The vacancy rate for Auckland office space has grown slightly, according to the latest research from Colliers, due to a combination of moves by large businesses and new stock entering the market.
Vacancy across Auckland’s CBD edged up in the six months to December, reaching 13.9 per cent, from a June reading of 13.1 per cent.
Ian Little, National Director of Research at Colliers, notes prime grade vacancy – categorised as a combination of A-grade and premium space – increased to 9.8 per cent from 7.5 per cent.
“This is largely the result of tenant movements such as BNZ and Beca as new developments have afforded businesses the opportunity to move to higher grade space, relocate to a favoured precinct, and to optimise their office footprint,” Little says.
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“New builds in Wynyard Quarter and the construction of Fifty Albert have been key contributors to supply in the city.”
Despite the growth in vacancy rates, Rob Bird, National Director of Office Leasing at Colliers, says some long-running trends remain prevalent in the market.
“Top-quality space is still being snapped up quickly by tenants who continue to seek a premises that draws their teams to the office,” Bird says.
One niche that has proven popular among prospective tenants is office floors with an existing fit-out, offering businesses a ‘plug-and-play’ option.
“Being able to lease space such as this holds appeal for firms because they can quickly establish their operations and avoid extensive costs when relocating.”
Among projects that will add to future supply, Mansons TCLM has announced their intention to develop the building at 35 Graham Street.
Meanwhile, The Symphony Centre, which is being leased by Colliers, will sit above the Te Waihorotiu Station (Aotea) on Wellesley Street West and will reignite interest in the midtown area, benefitting from the future opening of the City Rail Link.
In Wellington, cuts to the public sector workforce, a sluggish economic backdrop, and an increase in supply are testing the resilience of the capital’s office market.
Overall vacancy increased to 10.5 per cent in December, up from 8 per cent in June. Prime grade vacancy rose to 4.4 per cent moving from 2.4 per cent, the first time that figure has been above 4 per cent since June 2013.
Steve Maitland, Director of Office Leasing at Colliers Wellington, says the level of incentives offered will increase as landlords compete for tenants and their business amid slower market conditions.
“Rents have not dropped sufficiently to reflect the increasing vacancy rate with major landlords preferring to increase incentives to entice tenants. However, to remain competitive we foresee a softening of rentals particularly in the A and B-grade office markets with an ever-increasing level of incentives being offered,” Maitland says.
“One bright spot is businesses who have had limited choices in recent years to secure prime space now have more available stock.”
Colliers Tauranga recently completed a vacancy survey that revealed a vacancy rate of 10.6 per cent for office space in the city. With an array of exciting projects on the horizon, their cityscape is set to change.
Top-tier office space in the Panorama Tower and The Northern Quarter mixed-use development on The Strand will add more stock, while ongoing civic projects will add life to Tauranga’s CBD.
Looking to the South Island, data gathered late last year by Colliers Christchurch indicated strong demand for office space in the CBD with a vacancy rate of 8.3 per cent, which had dropped from 23.9 per cent in 2016.
Less reliance on working from home among local businesses and the attractiveness of a rebuilt central city were seen as key drivers.
- Supplied by Colliers
