Auckland’s Big Five Office Towers Record Historic Vacancy Low As Premium Rents Forecast To Increase

September 2023 – JLL’s latest quarterly Vertical Vacancy Report shows vacancy remains tight within the CBD’s largest five premium office towers - HSBC Tower, ANZ Centre, Vero Centre, PwC Tower and Deloitte Centre - which have now reached an historic three-year vacancy low.

Vacancy in these towers now sits at 2.1%, down from 2.9% in the first quarter of the year, with an additional 1,000sqm of space having been taken up since JLL’s last vacancy report. Nine out of 26 of Auckland’s prime buildings now have zero vacancies, while five additional buildings are 5% or less vacant.

Average net prime office space rents now command $566 per sqm, up 1.6% compared to the last quarter, having now risen for the last five quarters in a row.

Vacancy across premium office space in Auckland’s CBD has edged up slightly compared to the last quarter, now sitting at 8.9% up from 8.1%, representing a small increase of 2,500sqm of additional space coming onto the market, mostly due to the completion of new and renovated office space.

JLL’s Head of Research Gavin Read says the rent and vacancy divergence between office grades shows the continued momentum in the flight to quality phenomenon.

“Looking ahead, around 100,000sqm of premium office space in Auckland in the pipeline to be completed by 2026 yet average net prime rents are also forecast to increase by more than 12% over the next five years, so demand is likely to remain high for some time,” he says.

JLL’s latest vacancy report mirrors the findings in its recent office sentiment survey, which revealed that New Zealand was leading the way in terms of employees seeking to return to the office, with 70% of city-based Kiwis wanting to spend at least three days in the office.

JLL’s Head of Office Leasing Advisory Ross Bolton says that in other countries like the United States, office vacancy rates and rental growth remain relatively static and are only now seeing signs of recovery. A large number of organisations are resorting to mandates to get employees back in the office, so comparatively New Zealand is tracking well.

“New Zealand occupiers are responding to employee expectations on quality, collaborative space which is close to transport and amenities.

“They recognise the need to provide the optimum space for their employees and are understanding the importance of getting this right to retain and attract staff,” he says.

Ross adds Environmental, Social and Governance (ESG) in commercial office space is another global trend that continues to build momentum locally, with just over 30% of Auckland CBD office stock has Green Star certification, whereas for prime office space, this jumps to 53%, while secondary office stock is under 10% Green Star-rated.

"Proactive owners are getting ahead of the curve, implementing global best practices and obtaining credentials such as Green Star and NABERS to stay ahead of local regulations and future-proof their assets,” he says.

Elsewhere:

• Wellington and Christchurch are close to putting up the ‘no vacancy’ sign for premium office space, with 16 out of 26 premium office buildings now fully leased in the Capital; prime vacancy down 197 bps or 2% to just 5.3%; Only 1.6% available in sub-lease market
• In Christchurch, 15 out of 17 premium office buildings have zero vacancy; reflecting a significant take-up at 151 Cambridge and 83 Victoria; with occupiers may having to look to secondary or prime suburban options

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