Auckland metropolitan office vacancy dips

The best new properties are largely pre-leased before completion like the Mansons TCLM development at 96 St Georges Bay Rd, Parnell - artist's impression

Auckland's metropolitan office vacancy rate has edged downwards due to strong demand for new developments in the city fringe and suburbs, says a new research report.

The latest Colliers Essentials report has found the overall metropolitan office vacancy rate dipped to 6.0 per cent in March 2018, compared with 6.4 per cent a year ago. Prime office vacancy reduced by 0.8 per cent to 5.4 per cent.

The metropolitan report excludes office space in the Auckland CBD. It covers city fringe metropolitan areas like Parnell, Ponsonby, Newton and Newmarket; along with suburban/metropolitan centres like the Greenlane/Southern Corridor, Smales Farm, Takapuna and Mangere Airport.

Leo Lee, research manager for Colliers International, says it's reassuring the findings don't indicate the office leasing market is 'out of kilter' due to an oversupply of new metropolitan office space coming onto the market

"Uptake of new supply has been strong, meaning there are few prime office options available. Some of the remaining demand will be met with a healthy supply of new office space, with about 54,700sq m of new prime office space across 12 buildings due for completion in the second half of this year.

"Strong demand means rents are continuing to rise, with city fringe rents in particular continuing to grow from an already strong base. Overall prime metropolitan office rents have increased to an average of $318 per square metre. This shows the market is responding appropriately to demand."

Matt Lamb, the agency's Auckland leasing director, says the best new developments are largely pre-leased before completion.

Lamb points to the new Mansons TCLM development at 96 St Georges Bay Rd, Parnell, which will be anchored by Xero; Kiwi Property's Sylvia Park office development, to be anchored by ANZ and IAG; and 33 Broadway, Newmarket, to be anchored by Mercury and Tegel.

"Tenants are increasingly demanding quality new offices with large floor plates, end of trip facilities and excellent environmental credentials," he says.

"Developers are delivering some impressive new spaces, so we don't anticipate the demand will diminish anytime soon, under current market conditions, especially among larger corporate tenants."

Lee says the sales market also remains buoyant, with investors and syndicators continuing to buy quality developments.

Colliers recently brokered the sale of Goodman Property's Central Park Corporate Centre in Greenlane for $209m. The property was purchased by a joint venture led by syndicator Oyster.

Another notable transaction was 96 St Georges Bay Road, which sold for $116m to syndicator Augusta, representing a yield of 6.5 per cent.

Leo Lee of Colliers International

Matt Lamb, Colliers International