Strong demand for office space in CBD
Office space is becoming hard to find.
The amount of empty office accommodation within Auckland's CBD has fallen for the fifth consecutive year, reflecting the city's strong economic performance.
The latest Bayleys Research CBD office survey has found the overall vacancy reduced to 10.6 per cent - down from 11.4 per cent in January last year.
"Vacancy reached a cyclical high of 14.1 per cent in early 2010 as the recessionary economic environment took its toll on the business community," says Ian Little, manager of Bayleys Research.
"However since then, the economic recovery has gathered momentum and has fuelled new business formation, expansion and relocation.
"This has resulted in the amount of office space occupied by businesses in the CBD increasing by nearly 200,000sq m between early 2010 and this year.
"The current overall vacancy rate is now at its lowest level since early 2009, before the impact of the global financial crisis had taken full effect, when it sat at just below 10 per cent."
The latest survey shows vacancy within the prime end of the market - premium and A grade space - to be all but non-existent at just 3.3 per cent, compared with 4.4 per cent in 2009. Within premium premises, the survey found only one floor area of more than 1000sq m vacant and no instances of contiguous floors being available.
"The vast majority of the limited supply of space in the top grade comprises small areas on part floors," Little says.
While vacant A grade space is greater at 16,250sq m, he says it again comprises mainly small areas within dislocated floors over many buildings. The survey identified only four vacant areas of more than 1000sq m and only two instances of whole contiguous floors being available.
Vacancy within B and C grade space increased to a combined 15.2 per cent from 14.3 per cent a year ago. "This reflects the preference for higher grade space with a number of companies having 'traded up' in an improved economic environment," says Little. "There has also been a small decline within education sector occupation which has an impact on lower grade vacancy figures given the vast majority of space occupied by the sector is located within B and C grade premises."
Vacancy fell within eight of the CBD's 11 precincts in Bayleys Research's latest survey, with the largest decline recorded in Quay Park where a raft of new lettings to companies such as HiFx, Revlon, ANL and Airwork Holidays has pushed vacancy down from 15.1 per cent in January 2014 to 4.9 per cent this year.
The Britomart precinct is fully occupied and has the CBD's lowest vacancy.
In the city's largest precinct, Downtown, overall vacancy declined slightly to 12.1 per cent. But over a quarter of the precinct's vacancy is comprised within one building, 125 Queen St, which been largely vacant for the past five years following the BNZ's relocation to the Deloitte Centre on the other side of Queen St.
Winton Partners is redeveloping the whole building with plans including the replacement of the bathrooms on all floors and bringing the office space up to A Grade standard. Two floors are being refurbished and fully fitted out as show suites.
Little says given the continued strong performance of the national and Auckland economies, the pressure on available office space will continue this year as businesses remain in expansion mode.
"It is clear in the current climate that companies must plan well ahead if they foresee a requirement for additional or new space as they will be entering an extremely competitive market."