Latest Bayleys research shows that businesses are demonstrating a marked preference toward prime quality CBD office accommodation
There's a marked migration by businesses into high grade office accommodation, according to real estate firm Bayleys' latest review of the Auckland central business district office space market.
The latest six-monthly review shows that as of July the current prime office vacancy rate was 7.8%, down from 8.5% in the previous survey in January and down further from the 11.6% measured in January 2012.
By contrast, the vacancy rates "B" and "C" grade offices have been increasing in the past year and now stand at 15.6%.
Bayleys says there are a number of reasons for the shift in preference to top quality space.
"The most prevalent driving force, especially for large corporate and government tenants, is the seismic stability of buildings. Higher grade buildings, or those that have recently been refurbished, generally comply with or exceed current earthquake building standard requirements.
"Another major influence on the increasing divide between prime and secondary office vacancy is the improving confidence in Auckland’s economy.
"While occupancy cost minimisation was a key concern during the post-GFC downturn, as the economic recovery in Auckland and the country as a whole has gradually developed momentum, tenants have also become more willing to make long-term commitments to top quality space."
The overall vacancy rate in the Auckland CBD now stands at 12.6%, which is slightly up from 12% six months earlier. Vacancy levels hit a peak of 14% in 2010.
The rise in vacancy levels was despite, Bayleys says, a pick-up in "net absorption" of nearly 20,000 square metres of office space in the past six months and was due to "the addition of new or refurbished space eclipsing the level of tenant growth over the same period".
Bayleys says, however, it expects that a shortage of "new stock" coming on to the market, coupled with a continued "positive absorption" of CBD office space will result in a a resumption of the downward movement in the overall vacancy rate over the next few years.
The latest survey shows Auckland continuing to be not so much a tale of two cities but a tale of two CBDs.
Harbour views and proximity to the waterfront are clearly becoming the desired thing for businesses and office workers.
Bayleys says the CBD’s "northern precincts" con#continue to be favoured by tenants as reflected by their low, and mostly falling, vacancy levels.
"These precincts tend to carry a greater proportion#on of the more recently developed or refurbished higher grade buildings," Bayleys says.
"Vacancy rates in Western Reclamation, Viaduct and Britomart areas are 3.0%, 6.5% and 1.6% respectively.
"By contrast, in the more southern precincts of Upper Queen and Peripheral, Midtown and Symonds Street Ridge vacancy rates range from 9.3% to 17.5%."
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