Strong Demand Continues to Drive Growth in Auckland’s Commercial Real Estate Market
Despite a persistent economic downturn, Auckland’s high-quality commercial real estate market remains strong and continues to attract significant demand. According to the latest report from real estate firm JLL, both the retail and office sectors are experiencing robust demand, resulting in a notable decrease in vacancies and an increase in rents.
In the year-to-date, the retail vacancy rate in the CBD dropped by 7.3 percent, while rents saw a 5.4 percent increase. JLL’s head of research, Gavin Read, projects that this trend will continue, with rents in Auckland’s CBD expected to rise by another 4 percent by the end of the year, reaching $3800 per square meter. Prime luxury retail spaces are in high demand, causing attention to shift towards locations near the new City Rail Link stations, leading to increased interest and potential transactions.
The demand for quality office space in Auckland is also on the rise. Out of the city’s 26 office towers, nine have zero vacancy, and only five have less than 5 percent available space. At the top end of the market, premium office vacancy stands at 2.8 percent, with average net prime rents reaching $670 per square meter. To meet this demand, there is a healthy pipeline of over 100,000 square meters of new office development underway, including the refurbishment of 1 Queen Street, scheduled for completion in early 2024.
The growth in the commercial real estate market extends beyond the city center, with rising office rents and decreasing vacancies in the city fringe and south as well. Furthermore, Auckland’s industrial market is experiencing consistent growth, with prime and secondary rents increasing by 17.5 percent and 17 percent respectively since the beginning of the year. South Auckland, in particular, is leading the market, boasting the largest pipeline of new developments.
Overall, the strong demand for commercial real estate in Auckland is a testament to the resilience of the market, overcoming economic headwinds. Meeting the elevated expectations of tenants and workers is crucial to reviving the city and supporting other sectors such as retail and hospitality.
Frequently Asked Questions (FAQs)
1. What is the current vacancy rate in Auckland’s CBD?
As of the year-to-date, the retail vacancy rate in Auckland’s CBD has decreased by 7.3 percent.
2. How much have rents increased in Auckland’s CBD?
Rents in Auckland’s CBD have increased by 5.4 percent.
3. What are the projected rent increases for Auckland’s CBD?
According to JLL’s head of research, Gavin Read, rents in Auckland’s CBD are expected to rise by an additional 4 percent by the end of the year.
4. What factors are influencing the demand for commercial real estate in Auckland?
The demand for commercial real estate in Auckland is driven by the “flight to quality” phenomenon, where high-quality properties are highly sought after. Additionally, the proximity to the waterfront and new City Rail Link stations are attracting attention and increasing demand.
5. How is the office sector performing in Auckland?
The office sector in Auckland is experiencing strong demand. Nine out of the city’s 26 office towers have zero vacancy, and premium office vacancy stands at 2.8 percent. Average net prime rents have reached $670 per square meter.