Wellington and Christchurch have been leading the way in attracting office occupiers over the past six months, says CBRE New Zealand’s latest research, which shows marked drops in vacancy levels in both cities alongside strong take-up of well-located Prime office space in Auckland.
The research reveals:
-Outstanding performance in Christchurch, where the total CBD office vacancy rate has dropped from 10.6% to 5.4% to December 2021, and vacant space shrank by 14,734 sqm, or 48.9% over the period
Start your property search
-Prime (Premium and Grade A) vacancy in Wellington’s CBD dropped by 3.7% to a near-zero 0.7% in December 2021
-Auckland’s CBD has seen overall office vacancy levels rise over the second half of 2021, from 13.2% in June to 14.2% in December, although there has been a sizeable lift in Grade A space occupied as tenants come into the CBD from fringe and suburban areas.
Zoltan Moricz, Executive Director of Research for CBRE New Zealand, says: “The Christchurch office market in particular has been outstanding over the six months to December. We’ve seen really strong rental growth, universally strong across categories and sectors.
"Wellington has also been performing well, with strong occupier demand for prime office space in particular, although the Wellington market has also been bolstered by some older buildings being taken out of stock.
“Auckland has had no stock withdrawals, so it has not seen quite the same performance as Wellington. However, strong demand in Auckland for prime office space is creating opportunities to reposition older secondary stock in the right locations. The former West Plaza building at 1 Albert Street, now known as Alberts, is a good example of a well-repositioned building in a desirable central location driving strong tenant demand: a success story.
"Repositioning has also proved a successful strategy for attracting occupiers at the top end of the market, as exemplified by the comprehensive overhaul of the former Lumley Building on Shortland Street.”
In Christchurch:
-Total CBD office vacant space decreased by 14,734 sqm, nearly halving since the end of 2020.
-The vacancy rate decreased from 10.6% to only 5.4% at the end of last year, the lowest rate in more than 20 years.
-In 2021, total net absorption (new occupier demand for office space) was 16,589 sqm (10,788 sqm in H1 and 5,800 sqm in H2).
-Professional Services, Public Administration, Health and Social Services are the three largest industries in the market, between them occupying 200,000 sqm of office space.
-The suburban office market vacancy also decreased further, to 9.9% or 40,295 sqm. In the past five years, total vacant area decreased by 41.6% or 35,114 sqm.
Tim Rookes, Managing Director of CBRE Christchurch, says: “2021 was an extraordinary year for the Christchurch office market, driven by strong economic performance in the city and limited Covid restrictions. Christchurch GDP increased by 6.8% in the year to December 2021, against a national increase of 5.5%. Demand was widespread across different occupier types but also particularly strong from professional services firms, which took up over 4,000 sqm of space. Public sector occupiers contributed over 3,500 sqm of new take up. This strong demand has also helped our leasing and investment markets strengthen.”
In Wellington:
-CBD office vacancy decreased from 8.2% to 7.6% in H2 2021
-There was no Premium-grade vacancy in H2 2021, and no new Grade A vacancy.
-The total CBD vacant area decreased by 9,909 sqm to 101,852 sqm in H2 2021.
-More new and refurbished stock coming into the market will mean that vacancy rates in will lift in 2022 and 2023.
Matthew St Amand, Managing Director of CBRE in Wellington, says: “Wellington’s office market bounced back in 2021 with prime vacant and sub lease space being taken up. The leasing demand experienced in 2021 underpins an increasingly healthy market although we expect upward vacancy pressure on lower quality buildings as a higher volume of new and refurbished space is completed during the next two years. Wellington also experienced a continued growth in prime grade rents as a result of this low vacancy.”
In Auckland:
-Manson’s development at 136 Fanshawe Street added over 20,000sqm of new built space to CBD office stock during the second half of 2021.
-Strongly positive Prime grade net absorption was supported by previously non-CBD occupiers taking up space in the new completion on Fanshawe Street and continued occupier quality upgrades for tenants such as Paymark and Walker Wayland.
-Prime net absorption was 15,452 sqm in the second half of last year and nearly 25,000 sqm for the whole of 2021. Notwithstanding the completion of new supply, this ensured that the Prime vacancy rate declined to 8.8% during the course of the year.
Brent McGregor, Executive Chairman of CBRE NZ, says: “Prime grade space has held up well during the Covid era, with strong positive net absorption. Well located refurbished space is also meeting positive occupier demand but all of this has been at the expense of D and C grade property, where vacancy sits between 20% and 25%, presenting good refurbishment and conversion opportunities.”
- Article supplied by CBRE
