Strong Current Retail And Office Performance And A Healthy Pipeline Of New Space Offer Positive Indicators For Auckland
The latest (Q3) Market Snapshots from JLL show that persistent economic headwinds have failed to stall momentum in the ‘flight to quality’ that continues to characterise Auckland’s commercial real estate market.
Evidence of the phenomenon can be seen across both the retail and office sectors, with an increasing divergence between rents and vacancies.
Retail vacancy in the CBD is down 7.3% year-to-date, while rents have increased 5.4%. JLL NZ’s Head of Research, Gavin Read, says these overall increases have been driven by activity at the upper end of the market, where average prime rents have increased from $3,575 per sqm to $3,650 in the last quarter. Top prime luxury accommodation has also been setting new benchmarks over $5,500per sqm.
“Over the next two years, we think we’ll see the upper end of average prime CBD rents rise by at least another 4%, reaching $3,800 per sqm by the end of 2024,” says Read.
“Demand for prime retail is such that opportunities close to the waterfront are becoming scarce, which is pushing attention towards locations close to the new City Rail Link stations. Here, we’re seeing a significant increase in enquiry which we anticipate will lead to more transactional activity.”
As reported in JLL’s most recent Vertical Vacancy Review, quality office space in Auckland is in hot demand. Nine out of the city’s 26 office towers have zero vacancy, while five others have less than 5% space available. At the top end of the market, premium office vacancy now sits at 2.8%, while average net prime rents have increased to $670 per sqm.
With a healthy pipeline of over 100,000 sqm of new office development on the way, and the refurbishment of 1 Queen Street due for completion in early 2024, Read says it’s positive that the market is working to meet demand caused by the flight to quality in the office sector.
“Being able to cater to elevated tenant and worker expectations is critical to bringing life back into the city and supporting other sectors such as retail and hospitality.”
Outside of the city centre, it’s a case of a rising tide grabbing all boats, with prime office rents up and vacancy down in the city fringe and south too. Of note has been occupiers moving into 3 Te Kehu Way, Kiwi Property’s new 6 Green Star office block at Sylvia Park, and a 6.8% increase in average net rents for Takapuna.
Around the city rents across Auckland’s industrial market continue to rise, with prime and secondary rents up 17.5 and 17% year-to-date respectively. The market continues to be led by activity in South Auckland, which also has the largest pipeline of new development. The Manukau precinct alone has 376,276 sqm of space expected to be completed over the next three years.
JLL’s Q3 Market Snapshots, which cover the latest data and trends from Auckland, Wellington and Christchurch, are available for download at the links below: