- Occupier demand remains solid. In the past year, the overall metropolitan vacancy rate has decreased from 6.7% to 5.6%, with quality office space receiving the strongest enquiry. Prime vacancy rates reduced to an all-time low of 3.3% and secondary vacancy rates reduced to 6.3%.
- Occupier demand for higher-quality premises has led to over 25,000 sqm of office stock to be removed from the survey for refurbishment works. One example is the 107 Carlton Gore Road refurbishment by Argosy who is targeting a green star rating for incoming tenant Housing New Zealand Corporation.
- Over 28,000 sqm of new office stock has been added into the metropolitan office market this year. Notable examples include, 84 Don McKinnon Drive (AIG House), 33 Broadway (Mercury House), 96 St Georges Bay Road (Xero) and 195-199 Universal Drive (Morrisons Business Park).
- Limited space and steady employment provide the impetus for metropolitan office average net face rents to continue rising. Average net face prime rents now sit at $325 per sqm and secondary at $215 per sqm.
- Lower interest rate expectations are driving investor demand. Average yield compression for the 12-months to September 2019 was 60 basis points to 6.2% for prime office stock and 70 basis points to 7.1% for secondary office stock. Investment opportunities are becoming more difficult to source at these yields.
- Sales activity remains buoyant and competition is strong for quality assets. Private investors, owner-occupiers and syndication companies are the most active. Earlier this year, Stride Property Group settled on the ASB Bank tenanted property at 33 Corinthian Drive. Property and Funds Manager Oyster Management purchased the property for $50.5 million representing a yield of 5.88%. Settled in august this year, a local private investor sold 57 Market Road for $11.6 million to an Australian-based investor representing a yield of 5.78%.
