Precious metropolitan office pockets

3:03 PM Friday December 7, 2018 True Commercial

Colliers brokered the sale of 109 Carlton Gore Rd, Newmarket, for $28m. Photo / Supplied

Recently completed office buildings have created new pockets of vacancies outside Auckland’s CBD, contributing to a 1.6 percentage point increase in the metropolitan office vacancy rate.

The latest Colliers International metropolitan office survey found overall vacancy increased to 6.7 per cent in September 2018, compared with 5.1 per cent a year ago.

The prime vacancy rate has remained steady, at 5.4 per cent, since the last survey in March. The secondary vacancy rate has risen to 7.1 per cent, up from 6.2 per cent.

Colliers’ survey excludes properties in the CBD, focusing primarily on activity in the city fringe and suburbs.

Colliers director of research and communications, Chris Dibble, says 38,660sq m of new metropolitan office space has been completed in Auckland since the start of the year.

“Pockets of vacancies in these new developments have been the main driver in pushing up the overall vacancy rate,” he says.

“Significant new office developments on Auckland’s city fringe have included 22 Pollen St, Grey Lynn and the St George Corporate Centre in Parnell. In Auckland’s southeast, newly completed office properties have included Kiwi Property’s No.1 Sylvia Park, and Building 6 at Goodman Property’s The Crossing in Highbrook, East Tamaki.”

Dibble says a further 49,070sq m of metropolitan office space is under construction, while 37,050sq m is proposed to 2023. “Alongside this activity, many metropolitan office landlords are upgrading their buildings, especially in the city fringe. These newly refurbished buildings are receiving rental premiums and longer lease terms.”

Average prime metropolitan office net face rents have risen by 3.1 per cent in the last year and average prime capital values rose by 8.7 per cent. Average prime net rents across all of Auckland’s metropolitan office precincts now sit between an average low of $288per sq m and an average high of $354sq m.

Average prime yields in the same market have compressed to between an average low of 6.5 per cent and an average high of 7.1 per cent.

Sales activity in Auckland’s metropolitan market remains strong.

In July, 109 Carlton Gore Rd, Newmarket, sold for $28m and Oyster Property Group and its joint venture partner, KKR settled the $209m purchase of Central Park Corporate Centre. Both transactions were brokered by Colliers.