Office construction offers business relief


There is plenty of activity in both the prime office sales and leasing sector according to the latest New Zealand Research Report from Colliers International.

Auckland CBD

Prime CBD office vacancy has increased in Auckland rising to 3.6 per cent in June 2017 from 1.9 per cent a year ago.

Since 2014, businesses seeking prime office space have had very few options.

Now they have a little relief.

Outside of the CBD a few new projects underway will also help to relieve the pressure.

Vacancy in Wellington remains unchanged overall, sitting at 7.8 per cent in June 2017 compared to six months ago.

There is virtually no prime stock (0.1 per cent) available, as a consequence of buildings being removed from the total stock due to seismic damage.

New data for Auckland and Wellington retail vacancy shows market demand continues to be strong.

Since June 2016, overall retail vacancy has fallen to 3.3 per cent (down 0.9 per cent) in Auckland and 5.6 per cent (down 3.3 per cent) in Wellington.

Sales soaring

Looking at the commercial property sales data ($5 million or more) Colliers’ analysis shows the office sector as a major stand out.

Provisional data for June 2017 year showed more office sales recorded than any other sector, most of which in Auckland.

The value of industrial property sales level has eased somewhat despite positive investment conditions over the past 12 months.

Provisional data for June 2017 year shows an aggregate of $869 million of industrial property sales across New Zealand, down from the peak in June 2016 year of over $1.3 billion.

This is due to a lack of stock currently available for sale rather than a shift in investor sentiment.

Retail rallying

In retail sales, Auckland was once again the main player, making up 60 per cent of total retail sales volume of $5 million and above.

These sales data included some substantial investments by offshore investors.

Canada Pension Plan Investment Board brought a 50 per cent stake in the PSP portfolio and Angaet Property Group from Australia purchasing WestCity Waitakere shopping centre for $153 million.

Constraints in the lending market may dampen the ability of some investors to purchase at yields which will provide a neutral or positive cash flow.

However, many of the larger groups seeking New Zealand assets don’t rely on local debt funding and their appetite is undiminished.

Offices changing

Workplaces are changing rapidly as new technologies and ways of working reshape how and where we work.

The Colliers International Office Insight Survey gathers information from office workers about how their offices can be improved.

It also asks workers what they would want to be close to if they were choosing their office location.

The top three preferences in almost all cases are a cafes and lunch options, public transport and car parking. Preferences change dramatically when an office is located near a supermarket.

Supermarkets rise to the top as the most desirable feature.

They are higher than cafes and lunch options and also higher than public transport and car parking, but only for workers who are already near a supermarket.

Capital climbing

Colliers’ latest vacancy survey for Wellington retail shows a reduction of vacant space in almost all streets of the capital’s CBD.

Courtenay Place has had the largest decrease reducing from 21.6 per cent in June 2016 down to 9.2 per cent, with the majority of this change due to damage of the Reading Cinema’s after the November 2016 earthquake, effectively removing it from the available stock.

Manners Street vacancy has also reduced significantly, now at 8.4 per cent, down from 12.2 per cent a year ago, with the Post Office demolished on the corner to make way for the Lombard Lane upgrade.

This development is now nearing completion with some retail tenancies already open.

Vacancy on the CBD’s main strip Lambton Quay has become even tighter over the past year, reducing from 3.5 per cent to 3.3 per cent.

Other noteworthy changes include Mecca Maxima absorbing vacancy on Willis Street to open their first New Zealand store earlier this year, and Dixon Street having vacant space for the first time since 2009.

Industry expanding

The industrial sector is posting similar positive results.

According to the BNZ–BusinessNZ Performance of Manufacturing Index (PMI), New Zealand’s manufacturing sector has remained in continuous expansion since October 2012.

The seasonally adjusted PMI for June 2017 was 56.2, which was 2.0 points lower than May, however this is still positive as a PMI above 50.0 is considered to be expanding.

This expansion is hugely beneficial for the industrial property sector as manufacturing businesses provide a large portion of tenants for industrial premises.

The BNZ-BusinessNZ Performance of Services Index (PSI), which measures New Zealand’s service sector (such as supplier deliveries) has also remained in expansion long term.

This sector is another key provider of tenants for industrial premises.

With the industrial property sector built on businesses that provide core goods and services nationally, this is yet another strong fundamental backing its strong performance.

Download a full copy of the report on the Colliers website here