Availability of office and retail space in Auckland and Wellington’s central business districts (CBD) is markedly different – but the trend is a continuing one.
Wellington’s acute shortage of CBD office space has only worsened in the year since the November 2016 quake, new figures show. Colliers International’s latest monthly New Zealand Research Report, found office vacancy rates are continuing to dip to record lows, particularly in the prime sector. Meanwhile, Auckland continues to rise due to downtown and waterfront areas opening up.
In speaking with Research Manager at Colliers International; Leo Lee, the December 2017 survey found office vacancy in Wellington’s CBD fell to 7.4 per cent – down from 10.5 per cent a year ago, shortly after the quake. “Demand pressures continue to grow since the loss of nearly 100,000sq m of office space since November 2016,” Lee says. There is little relief in the prime sector, with less than 300sq m, or just 0.1 per cent, of prime space available. Lee says Wellington’s secondary vacancy rate has also dipped by 3.3 per cent, with only 103,147sq m (9.1 per cent) of secondary stock available now compared with a year ago.
The real question seems to be whether the new office supply in Wellington this year will be able to alleviate some of the demand pressures. The completion of new office developments in Wellington last year totalled 38,800sq m. One of the largest additions was the new Transpower building at 22 Boulcott Street (8,440sq m), which allowed the tenant to consolidate two office locations.
While both 20 Customhouse Quay and the new PwC Centre are expected to be completed by mid-year, almost all of their 26,400sq m of new office space has been pre-committed. Lee says Wellington’s low office vacancy rates have seen average prime gross face rents increase 3.9 per cent in the year to December 2017. However, the new stock has done very little to alleviate demand, and vacancy is unlikely to lift anytime soon.
In comparison, Auckland’s CBD, office vacancy increased 0.7 per cent to 5.9 per cent overall in December 2017, but continues to remain low. It has not exceeded 6 per cent since the middle of 2015. The latest increase stems mostly from more prime stock becoming available in Viaduct Harbour and Victoria Quarter.
The next two years will see close to 60,000sq m completed over three projects, but vacancy will remain tight over this period. Vocus House on Sale Street is set to be completed this quarter, while the majority of new office supply is set to arrive in Q3 2019. PwC Tower in Commercial Bay makes up over half (39,000sq m), while One 55 Fanshawe, to be constructed on the ex-Caltex site by Mansons TCLM, is expected to contribute 15,000sq m.
It’s certainly a great time to be a landlord in the prime office market in Wellington. That sentiment is reflected in Colliers International’s latest quarterly investor confidence survey, which found Wellington was the only main centre to record an improvement in office investor confidence.