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Latest Vertical Vacancy Report Reveals Positive Auckland Office Sentiment Despite Lingering Shadow Of COVID Uncertainty

June, 2022 – Enduring low vacancy rates across our major centres’ prime office buildings reflect that demand for premium buildings in good locations remains strong, but the impact of changing attitudes to office life are also starting to become more evident.

JLL NZ’s biannual Vertical Vacancy Report shows that vacancy in Auckland’s core (8.9%) and Wynyard (3.4%) districts has increased marginally in Q1 of this year compared to Q3 of last.

The Q1 data shows an additional 9,300 square metres of floorspace has become vacant in Auckland, which translates to room for around 650 office workers. With vacancy spread unevenly across the city on a building-by-building basis and several of the city’s flagship buildings fully tenanted, JLL NZ’s Head of Research, Gavin Read, says the data reinforces anecdotal evidence around flight to quality and companies’ adaptation to hybrid working.

“From an occupier perspective, this hints that companies are adapting their floorplate requirements to the new normal of hybrid working. Although the biggest clues that companies are prioritising flexibility, sustainability and wellness elements to attract and maintain staff come in the strong demand for quality buildings in good locations and the growing divergence between prime and secondary rents.”

“For investors and landlords, tenant quality and long-term viability of their business remains a critical focus with owners increasingly seeking to de-risk future returns.”

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Read says that while demand for quality, green buildings remains strong, he anticipates the impact of rising interest rates on yields will influence future investment and development activity.

“The delivery of these projects will rely on various factors including pre-commitment, the ability of the construction industry to keep up and how the Government’s post-pandemic responses roll out.”

Elsewhere around the country…

In the Capital, limited additions to supply in recent years and ongoing Government requirements continue to support low vacancy levels and place upwards pressure on rental levels for prime office space. Read says high pre-leasing activity for new builds shows a continuation of the ‘flight to quality’ trend, which will ultimately have a significant trickle-down impact on the secondary stock market.

Christchurch has experienced a subtle drop in vacancy, with the 15,000 square metre Grand Central now fully leased. While there is no office-only prime new build development in the pipeline, office space features in a number of mooted mixed-use buildings including a new apartment building at 12 Oxford Terrace.

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