Auckland prime office vacancy rates at historic lows
Wednesday, 22 November 2023
High demand for premium office property in Auckland’s CBD has led to record low vacancy rates, and rising rents, a commercial real estate firm says.
JLL has released its latest market snapshot report, and it showed high-quality office property continues to defy economic headwinds as employers upgrade their space to tempt workers back to the office.
Premium office vacancy rates within Auckland central fell to a historic low of 2.1% in the third quarter, from 2.8% vacancy last quarter.
Nine out of the city’s 26 office towers had zero vacancy, while five others had less than 5% space available.
Average net prime rents had increased by $15m₂ to $670 per square metre in response to the high demand.
In Wynyard Quarter, near the CBD, the prime vacancy rate rose to 3.3% from 3.1%, but 13 out of 19 buildings in the area had 0% vacancy, while one had just 2% vacancy.
JLL head of research Gavin Read said there was a big difference between premium and secondary office space, with vacancy rates in secondary office space at 18% in June.
The gap between vacancy rates and rents in the different grades of office space was widening, as the “flight to quality” increased, he said.
“Office occupiers want high-quality space that meets their requirements around sustainability, and that is in desirable locations, with good amenities, and appeals to their workers.”
Companies wanted people to return to the office, and attractive office space helped that process because many people wanted to return, he said.
A recent JLL survey found that 20% of employees would like to be back in the office five days a week, and 70% would like to be back for three to five days.
“People want to talk to, and collaborate with their colleagues in person,” he said.
“You don’t get spontaneous, creative ‘water cooler’ type interactions, or informal mentoring, over zoom; it’s just too formal and restrictive.”
There was a pipeline of over 100,000m₂ of new office development on the way, and the refurbishment of 1 Queen Street was due to be completed early next year.
Read said it was positive the market was 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 CBD, prime office rents were up and vacancy rates were down in the city fringe and south.
The trend was similar in Wellington and Christchurch, with prime rents increasing last quarter. Christchurch also had a record low vacancy rate of 3%, and 0% vacancy in 15 out of 17 buildings.