Auckland Records Highest CBD Office Vacancy Rate For A Decade While Wellington’s Market Tightens

Prime office vacancy in Auckland’s CBD has increased to 7.5% over the first quarter of 2021, the highest it’s been since 2011. However, vacancy is not spread evenly across the city. Four buildings in particular bear the brunt, responsible for over half of all vacancies, something JLL NZ’s Head of Research and Consultancy, Paul Winstanley, says reflects a distinct waterfront pull and a tenant-favourable market enabling a flight to quality.

“The strong performance of Kiwi and Precinct properties, particularly Precinct’s Commercial Bay, has been diluted by substantial availability in the likes of Shortland Street, Fort Street and the ANZ Centre, while northward tenant drift toward the waterfront has left some midtown properties, such as QBE Centre and SAP Tower, haemorrhaging vacancies,” he says.

“Further, we also analysed Wynyard Quarter, and while vacancy has increased in this last quarter, it remains at structurally low levels of just 2.2% and is likely to remain that way with high pre-leasing activity and the presence of large anchor tenants.”

Meanwhile around the country, prime office vacancy in Wellington’s core remains at an extremely low level of 1.4% and Christchurch vacancy has actually decreased to 4.8%.

“With capital values across New Zealand protected to a degree by yield compression, we have seen a revived interest in commercial development,” says Winstanley.

“In Auckland and Wellington several large office projects have come online in this first quarter, while Christchurch has shifted more towards the industrial sector.”

As reported in our Q1 Vertical Vacancy Review:

• CBD prime office vacancies of 7.5% in Auckland, 1.4% in Wellington and 4.8% in Christchurch
• Auckland CBD average prime net face rents remain at $516 p/sqm, having risen 1.8% year-on-year despite the economic strain of COVID
• Wellington CBD core prime gross face rents rose 1.7% to $598p/sqm
• Christchurch core average prime rents remained at $330 p/sqm for eighth consecutive quarter
• Substantial land-banking in the Christchurch CBD (estimates suggest 20 percent of sites remain undeveloped) and an increased focus on industrial assets has contributed to subdued development activity

For more information, download the full report here.

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