Help on horizon for office shortage
The lowest levels of office space in Auckland in more than 20 years look likely to come to an end in 2019 as more supply hits the market.
Colliers’ research director Chris Dibble said across the country the economic outlook was solid, hiring intentions were up and that translated into more leasing.
Rents were steadily rising in most major centres, with the highest rent hikes in the areas of highest job growth.
But as construction ramped up to meet demand, the property cycle was going into its next phase and ’’this will provide the market with more space to consider,’’ Dibble said. Auckland Auckland remains on track for another strong year in the CBD office sector, with unheard-of levels of demand for a small amount of empty office space.
However, ‘‘we forecast that the vacancy rate has bottomed out this cycle with new supply on its way,’’ Dibble said.
More than 112,000 sqm of new space was due for completion over the next five years, about 8 per cent of existing supply.
As tenants move to new premises, space is being left behind and Dibble did not expect vacancy to get any tighter.
.’’We project overall vacancy to increase from 5.5 per cent to 7.5 per cent by mid-2020, before slowly reducing again.’’
Rent-wise, prime and secondary net effective rents had risen by 7 per cent and 6 per cent respectively over the past year, and tenants were shrinking their footprints where they could.
Rental growth was expected to slow in 2019, when more supply came on stream.
But the drop would be shortlived as job prospects picked up the following year.
As far as investors were concerned, Dibble said competition was strong, with low interest rates and a lack of alternative options helping to push up prices and building valuations. Wellington After a major reshuffle and cutbacks in government office space, Wellington’s market had consolidated and would move on more confidently, Dibble said.
Prime gross rents were up 2.2 per cent and vacancy levels were 12.1 per cent, mostly for secondary space. Christchurch Christchurch was a market with a large development pipeline that was progressing well, Dibble said.
High levels of new space had kept CBD rents down and they were likely to stay flat for the next
The property cycle is going into its next phase - Chris Dibble
few years.
‘‘We currently estimate that vacancy will track at 20 per centplus over the next few years as developments complete,’’ he said.
This was much higher than the 14.3 per cent vacancy rate before the earthquakes, but the Christchurch CBD had faced higher levels of vacancy before.
Investors remained highly competitive, but they were conscious of tenants shifting from the suburbs back to the CBD.