Office vacancy rates hit 10 year low in Wellington

6 February 2019

Wellington office vacancy rates are at their lowest level for a decade, putting the balance of power in the hands of landlords this year.

The latest Colliers’ NZ Research Report shows a 10-year low vacancy rate of 6.2 per cent in the capital with just 86,000 sqm of vacant office space available.

Richard Findlay, managing director of Colliers Wellington, said space in the CBD remains tight after the significant reduction in total supply following the Kaikoura earthquake.

“Prime office vacancy is at 1.2% with secondary vacancy at 7.6%. The supply of potential new developments and refurbishments in the next three to five years will go some way to alleviating the shortage of quality space in the central city. As well as the usual ‘top grade attributes’ required by tenants, they’re now also being very specific in wanting seismically resilient structures.

“The new project, 1 Whitmore, currently being driven by property developer and investor Newcrest, is a prime example of the sort of premium base isolated office building that tenants are seeking.”

Newcrest also recently completed the 20 Customhouse Quay building on the waterfront.”

Executive director Jim Pinson says that Wellington’s low vacancy rates over the past 12-18 months, along with the positive demand outlook, has helped accelerate the next development cycle.

“Typically, we would have expected a pause in Wellington development activity after the completion of 20 Customhouse Quay and the PwC Centre, but unusual Wellington market dynamics have brought this forward and we see no slowdown for some time.

“We now expect to see the next round of refurbishment and development to provide new space from 2021-2023 onwards.“

In the industrial sector, the latest annual building consents suggest continued growth, both by number and value. In the year to November 2018, the value of national industrial building consents totalled 1.37 billion, representing a 16% increase from 2017 and attaining an all-time high since 1991 when the numbers were first recorded. Wellington grew to $37 million, eclipsing $29 million in 2017.

Meanwhile, major retail asset sales helped boost the total value of transactions in 2018. Although still provisional, and likely to rise over the next few months as more data is officially reported, total retail property sales in New Zealand reached $600 million in 2018, representing a two per cent increase from 2017 for assets sold over $5 million. While total sales value increased, the total number of sales declined in 2018 to 34 from 44 in 2017, suggesting investors’ appetites are leaning towards the higher end of the value spectrum, the report says.

ENDS

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