APPD Market Report Article


November 29, 2022

Gavin Read, Head of Research, New Zealand


NZD 543


Uneven spread of occupancy across the CBD

  • Waterfront properties performed better than those located further up Queen Street. Buildings with strong long-term occupier-owner relationships have also continued to do well.
  • Overall vacancy for Auckland CBD increased marginally from 11.5% to 11.7%, suggesting only an additional 2,800 sqm in vacancy for 3Q22. Prime vacancy was recorded at 6.3%, and secondary vacancy at 13.9%, being a differential of 7.6%, which is 140 bps wider than the second half of 2021.

Several prime CBD projects to be delivered in the next two years

  • Precinct Properties are well through their redevelopment on the Deloitte Centre at 1 Queen Street, being a mixed hotel, retail and office property that will be a 6-star green star rated property, including approximately 14,300 sqm of premium office space. Estimated completion is in mid-2023, and the anchor tenants will be Deloitte and Bell Gully.
  • Other notable developments within the CBD are a proposal for the 5-15 Albert Street site (owned by M&L Hospitality), a redevelopment of 87 Albert Street/16 Kingston Street (owned by Auckland Real Estate), which will provide for approximately 14,500 sqm of office accommodation, as well as a Mansons TCLM campus-style proposal on Beaumont Street in Wynyard Quarter.

Demand for prime properties remains strong

  • The upper end of prime net rents increased by NZD 15 per sqm, to reach NZD 680 per sqm per annum, while the upper end of secondary net rents were unchanged for the last twelve months at NZD 290 per sqm per annum.
  • Average prime yields increased by 25 bps, and average secondary yields increased by 50 bps, in what seemed to be a trend across New Zealand’s markets. The tail of prime yields pushed out by 38 bps, while that of secondary yields pushed out further, by 50 bps.

Outlook: Occupiers to push for a decrease in desk vacancies

  • The focus on sustainability has continued to increase. For example, Precinct Properties announced in the quarter that it aimed to halve its operating emissions, in order to hit its net zero carbon target by 2030.
  • From an investment point of view, the Auckland Office leasing market, both for the CBD and for CBD fringe, has had increased enquiries for the quarter, with quality spaces being snapped up quickly. There is evidence of pent-up demand for investment-grade assets in New Zealand, and a significant rebound in office transaction activity in particular is expected during 2023.

Note: Auckland Office refers to Auckland's CBD and Viaduct Harbour office markets.

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