Office market outpaces other sectors
Auckland’s office market is leading the way, with the metropolitan sector particularly buoyant.
New Zealand’s office market is outpacing other commercial property sectors with exceptionally strong sales and record low vacancy rates, Colliers International research shows.
The Australia and New Zealand Capital Markets Investment Review, released this week, found $1.5 billion of office transactions of $5m or more took place in New Zealand in the fiscal year to June 2017.
That was higher than the $1b of retail property transactions of $5m or more, $869m of industrial property sales of $5m or more, and $98.6m of hotel transactions of $5m or more.
The provisional figures, compiled by Colliers International’s Research and Consulting team, show 56 office properties worth $5m or more changed hands in the last fiscal year.
Capital Markets national director Peter Herdson says Auckland’s office market is leading the way, with the metropolitan sector particularly buoyant.
“Last year we saw New Zealand’s largest ever office property transaction — and it wasn’t a landmark Auckland CBD office tower, but a metropolitan office complex.
“The Goodman-developed Millennium Business Centre on Great South Rd, Greenlane, was sold to syndicators Oyster Group for a record $210 million. The deal, brokered by our Capital Markets team, shows demand for office properties outside Auckland’s CBD remains very strong.”
Colliers’ Auckland investment sales director Gareth Fraser says high-profile office buildings are incredibly attractive to both local and overseas buyers. “Investors are particularly keen on offices with good lease terms, high occupancy rates and low capital expenditure costs.
“Demand is so strong that interested parties are struggling to find flagship properties to buy, which is leading many investors to buy developments off the plans.”
Fraser says low vacancy rates are continuing to drive demand.
Colliers’ recent Auckland Metropolitan Office Research Report found only 6.3 per cent of office space outside the CBD was vacant — well below the 10-year average of 8.2 per cent.
The agency’s research manager Leo Lee says the biggest driving factor is a shortage of prime office space in the CBD.
“With record low office vacancy rates continuing, it is becoming hard for businesses to find quality affordable space in the central city. Spill over demand is driving strong growth in the metropolitan office market, particularly in areas close to good transport hubs and amenities.”
Colliers’s leasing director Matt Lamb says changing tenant needs are also helping to drive growth in the metropolitan market.
“An emergent culture of collaboration is driving demand for better-connected workplaces with contiguous floorplates, which are very hard to come by in the CBD.
“Companies are also looking to create efficiencies by housing all of their employees in one building, rather than across several floors or locations.”
Lamb cites the Millennium Business Centre and the Mercury building, under construction in Newmarket, as prime exampless. He says companies are recognising the importance of quality workplaces in attracting and retaining staff.
Richard Kirke, Colliers’ International Sales Director, says Auckland’s underlying economic strength continues to be the driver of overall demand in the office market.
“Growth in population and employment, as well as increased construction, bring new challenges, but will help to keep vacancy low and rents buoyant over the next 12 months.”
Colliers International’s survey to March 2017 found only 108,000sq m of metropolitan office space was available in Auckland. About 29,300sq m of new prime office stock was completed in the six months to March 2017. A further 65,686sq m is under construction, while 29,200sq m is proposed for future development.