Colliers International's Metropolitan Office Research Report

Colliers International's Metropolitan Office Research Report 2016

The report talks of ‘fear of missing out’ among investors and owner-occupiers that, along with demand and a lack of stock, is making some price levels ‘untenable’.

It mentions business is booming in Auckland – driving tenant demand for office space in Metropolitan Auckland to an eight year high.

Other key report findings include:

• Total metropolitan office supply reached more than 1.7 million square metres in 2016. Developers built 20,300 sqm of new space in the past 12 months.

• The growth in demand as well as supply has increased net absorption rates, pushing vacancy to an eight-year low of 6%, with approximately 106,000 sqm of available space. If all of the space was leasable, it would be absorbed in just two years under current employment growth rates.

• Vacancy rates in the City Fringe, Southern Corridor, West Auckland and Auckland South are at cyclical lows of 7%, 8%, 6% and 7% respectively. The North Shore has the lowest vacancy rate at just 4%.

• There is little evidence to suggest that the metropolitan office sector will deviate from its current growth path. Businesses are moving away from the status quo and are realistic about their future plans, taking on more calculated risks.

• There is still some way to go before many of the buildings are completed. This may cause some uncomfortable positions for tenants in the short-term if enquiries are left too late.

• Approximately 120,000 sqm of more supply is on its way to Metropolitan Auckland which will help the sector avoid a critical shortage of non-CBD office supply that would hamper the growth of arguably New Zealand’s major economic employment zone of small to medium sized businesses.

• Only some precincts and tenants will see greater levels of opportunity as developers face the on-going issue of finding suitable land capable of development. If more land was available, it is likely that more supply would be built despite the pressure on feasibility from construction costs.

• With no clear advantage between landlords and tenants in a more balanced environment in the medium term, rents will likely increase between 1% and 4% annually over the next few years. This is lower than previous upswing cycles, which reached double digits in some cases.

• The sound property fundamentals supporting the metropolitan office market has elevated the already high levels of competition amongst investors, owner-occupiers and syndicators. A new wave of asset appreciation is forecast as conditions continue to promote sales activity.
Auckland_Metropolitan_Office_Research_Report_2016.pdf [Updated]

ends

© Scoop Media