There has been a dramatic spike in Wellington office sector confidence reaching 39 per cent, the highest result recorded since the survey began in 2006 according to the Colliers International New Zealand Q1 2017 commercial investor confidence survey
Post-quake activity in Wellington has seen a 7 per cent reduction in office stock, pushing vacancy rates down in the CBD. Prime office vacancy rates are at an all-time low of 1.2 per cent – less than 3,000 sqm of space.
Colliers believe the disruption to the demand and supply equation will see the market swinging heavily in favour of the landlord, with rents expected to go up over the next 12 months.
There is a resurgence of retail activity in Wellington CBD with a flurry of new store openings both from national and international retailers.
Prime retail space is scarce in central Wellington. Since the arrival of David Jones last year, retail vacancy on Lambton Quay has declined from 4.0 per cent (Dec-15) to 3.5 per cent (Jun-16) and now 3.3 per cent (Dec-16).
Nationally in comparison to Wellington, commercial investor confidence dropped. However, it remains robustly positive at plus 24 per cent, and there is no shortage of new projects in the pipeline across a variety of property sectors.
Supply can be slow to react to demand, and it is no surprise that developers are increasingly confident in undertaking development projects in times of shortage of commercial space.
In Auckland, Goodman has recently announced it will be investing in excess of $44 million across five developments at Highbrook Business Park. Two of those will be industrial facilities, as well as future stages of The Crossing (offices), and a Quest serviced apartment expansion.
Spark is committing to a new 5,085 sqm purpose-built, four-level office development in Cathedral Square, being developed by Nexus Point, signaling a return to the CBD in Christchurch.
Strong net migration in the year to February rose to 71,333, the fifth consecutive month of net migration gains, setting a record yet again.
The tourism boom has stimulated increased overseas investor interest with four hotel developments announced in the last month.
These include a $60 million, Holiday Inn Express in Queenstown, 21 level, Four Points by Sheraton Hotels in central Auckland, a 6 level, Sebel Hotel in Manukau City, and a seven-level, Hilton DoubleTree in Wellington.
The combination of these developments will add a much-needed 742 additional guest rooms to the accommodation supply.
There are no signs of a slowdown in visitor numbers, as more arrive for the World Masters Games and the British and Irish Lions Tour, which will add further pressure to the accommodation supply.
Office
Auckland metropolitan office vacancy reached 5.6 per cent, an eight-year low in September 2016. Developers that had the foresight and ability to absorb higher levels of risk and plan for this a few years ago, are now receiving strong enquiry for their new premises. By June 2016, Colliers expects overall stock to increase by 5 per cent and vacancy to only peak at 8.2 per cent (lower than the June 2014 vacancy rate).
The last quarter has seen the completion of Auckland Airport’s Quad 7, Mitre 10’s Albany head office and EMA’s employment campus in Newmarket. Increasing the office stock by 18,600 sqm. A further 17,500 sqm is expected to be completed by the end of this year.
Retail
A new 590 sqm dining precinct at 125 Queen Street has been completed and is now is in the process of being leased.
The developer, Special Situations Assets Limited, acquired the building in 2014 after it had been vacant for five years, with the goal to bring premium retail, dining and office space to the Auckland CBD market.
New World supermarket is in the basement of the building, with the ground floor hosting ASB along with further retail space still available for lease.
The dining precinct is located on level 1, with a gym, crèche and 28 level office tower directly above. The exterior also has a giant LED signage screen for tenant use.
The laneway style dining precinct is similar to the already established Elliot Stables and can be accessed through the iconic façade on Queen Street or at street level on Swanson Street.
Industrial
The strength in the Auckland Industrial market continues with the latest survey showing 2.1 per cent overall vacancy, the lowest on record since the survey began over 20 years ago. In the last six months, prime vacancy has declined from 1.7 per cent to 1.4 per cent, and secondary vacancy from 2.4 per cent to 2.3 per cent.
Despite over 250,000 sqm of new development being completed in the past 12 months, the amount of prime space available remains tight, causing an overflow of demand into the secondary sector, particularly concentrated in Mt Wellington, Onehunga / Penrose and Rosebank / Avondale Areas.
This recent crop of developments includes the new state-of-the-art Sistema factory of 53,000 sqm completed Q3 2016 at Auckland Airport.
