21 Nov 2023

Auckland commercial real estate rents keep rising

6:19 am on 21 November 2023
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Retail vacancy in the CBD fell 7.3 percent in the year-to-date, while rents increased 5.4 percent. Photo: Unsplash / Josiah Kemp

A persistent economic downturn has failed to stand in the way of strong demand for Auckland's high-quality commercial real estate.

Real estate firm JLL's third-quarter report for the period ended September indicates strong demand for both retail and office sectors, with an increasing gap between increasing rents and falling vacancies.

Retail vacancy in the CBD fell 7.3 percent in the year-to-date, while rents increased 5.4 percent.

JLL head of research Gavin Read said demand was expected to drive up Auckland's rents in the CBD by another 4 percent by the end of the year, to reach $3800 a square metre (sq m), from $3650 per sqm in the third quarter.

The latest Q3 Market Snapshots from JLL showed persistent economic headwinds had failed to stall momentum in the 'flight to quality' that continued to characterise Auckland's commercial real estate market.

Top prime luxury accommodation was setting new benchmarks at more than $5500 per sq m.

"Demand for prime retail is such that opportunities close to the waterfront are becoming scarce, which is pushing attention towards locations close to the new City Rail Link stations," Read said.

"Here, we're seeing a significant increase in enquiry which we anticipate will lead to more transactional activity."

Quality office space in Auckland was also in demand, with nine out of the city's 26 office towers with zero vacancy, while five others had less than 5 percent space available.

At the top end of the market, premium office vacancy was 2.8 percent, while average net prime rents increased to $670 per sq m.

Read said the market was working to meet demand in the office sector, with a healthy pipeline of more than 100,000 sq m of new office development on the way, and the refurbishment of 1 Queen Street due for completion in early 2024.

"Being able to cater to elevated tenant and worker expectations is critical to bringing life back into the city and supporting other sectors such as retail and hospitality."

Outside of the city centre, Read said it was a case of a rising tide grabbing all boats, with prime office rents up and vacancy down in the city fringe and south too.

Auckland's industrial market also continued to rise, with year-to-date prime and secondary rents up 17.5 percent and 17 percent respectively.

He said the market continued to be led by activity in South Auckland, which also had the largest pipeline of new development.

The Manukau precinct alone had 376,276 sq m of space expected to be completed over the next three years.

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