The ongoing adaptation of businesses to changes in workplace practices, employee and consumer preferences, and an increased focus on sustainability are leading to numerous strategic relocations and the optimisation of operational footprints across Auckland CBD's office and retail sectors.
According to the latest research from Colliers, office vacancy across Auckland’s CBD remained largely stable over the first half of 2024. Overall vacancy edged up from a December 2023 reading of 12.2 per cent to 13.1 per cent as of June 2024.
Trends which have shaped the market over recent years, however, remain in focus. The flight to quality movement has seen the divergence in vacancy rates between prime grade and secondary accommodation widening. Secondary grade vacancy stands at 18.6 per cent, in stark contrast to prime grade vacancy, which was recorded at 7.5 per cent.
Ian Little, Associate Director of Research at Colliers, says vacancy is lower still within buildings which offer strong environmental credentials, with Green Star-rated buildings having an overall vacancy rate of 4.8 per cent.
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“There also remains a wide variance in vacancy rates across precincts, with businesses continuing to show a preference for the CBD’s waterfront locations,” Little says.
“The variances reflect the strategic decisions being made by business in response to evolving conditions. There is no doubt that hybrid working will continue to play a significant role in shaping workplace practices.
“However, businesses are taking action to attract staff back to the office more regularly by providing high-quality office space in premium locations and prioritising staff wellbeing.
"This has underpinned the demand for space within the CBD’s waterfront locations and within buildings which boast high Green Star and WELL ratings.”
Major business relocations which have taken place recently or will occur over the short-term future include Deloitte, BNZ, Beca, Spark, and One NZ.
The relocations have also provided the opportunity for businesses to ‘right size’ their property footprint and to provide employees with an experience-rich workplace, promote collaboration and innovation through innovative design, and optimise space configuration.
As with the office sector, the CBD’s retail vacancy rate saw little change over the opening half of 2024. Overall vacancy was recorded at 10.3 per cent in Colliers’ June survey, down slightly from the 10.4 per cent recorded in December.
The retail sector continues to face significant challenges – both structural and cyclical – which are shaping diverging demand patterns across locations and retail categories.
Once again, as with the office sector, demand is strongest in the northern precinct, occupied primarily by luxury and international brands, with vacancy remaining at sub 5 per cent. The shortage of leasing options has seen new benchmark rentals being achieved.
Demand within the CBD’s other precincts is softer with the challenges faced by retailers brought into sharp focus by the announcement from Smith & Caughey’s that it is to either significantly reduce its footprint or close entirely.
Sephora has also announced that it will close its CBD store, while retaining its outlets in Newmarket and Sylvia Park.
“This move provides another example of a business looking to optimise its property footprint, balancing the advantages that physical stores provide with the shift in consumer demand to e-commerce offerings,” Little says.
“While the retail sector faces challenges, supports are also evident. The prospects for interest rate cuts in the short-term future are increasing as inflation slows, which will ease pressure on household budgets.
"Population growth, the return of overseas visitors and students, and increasing numbers of workers returning to the office are also underpinning demand.”
- Supplied by Colliers
