COMMERCIAL PROPERTY with Bayleys North Shore Commercial
Turning Point for North Shore Office Market
This report comes from the Bayleys North Shore Commercial team.
Since 2010, two years of positive uptake of office space, albeit at a lower rate that previously experienced, is reflected in a reducing vacancy rate. As the recession took hold, between 2008 and 2009, the demand for new space dropped away severely, as is displayed by the drop off in annual absorption.
The North Shore’s office sector has shown significant improvement over the last year with a marked reduction in overall vacancy as businesses continue to move into empty space. Currently 11.2% of space in the office precincts of the North Shore is unoccupied, down from 14.1% in 2011.
The reduction in vacancy comes for the first time in six years as positive absorption of space has begun to counter the long construction tail evident in the North Shore’s northern precincts. The construction tail comes from high levels of speculative development committed to in 2006 and 2007, driven by high levels of business creation and expansion, along with the availability of business development land, particularly in Albany, Mairangi Bay and Rosedale.
Since 2010, two years of positive uptake of office space, albeit at a lower rate that previously experienced, is reflected in a reducing vacancy rate. As the recession took hold, between 2008 and 2009, the demand for new space dropped away severely, as is displayed by the drop off in annual absorption. Concurrently, there was newly completed space still coming onto the market, resulting in a long-term upward push of vacancy rates. 2010 was the most detrimental year for the office sector as businesses were shedding space – approximately 2,500m².
Interest for office space is coming from two distinct markets, according to local agents – larger tenants taking the opportunity of the availability of space to move into their preferred locations and smaller businesses taking advantage of favourable rents to move into bigger premises to accommodate their growing business.
The availability of larger floor plates in the southern precincts of the North Shore has enabled larger tenants to relocate here. This has been one of the active sectors in the market over the last 12 months. The well established amenity of the southern precincts as well as easy accessibility to Auckland Central Business District has been another catalyst for companies to relocate as the opportunity has arisen.
Alternatively, the newer precincts further north are appealing to smaller growing businesses. These sorts of tenants are dominating the market for floor areas of between 100m² and 300m², of which there are a number of options in Albany, Rosedale and Mairangi Bay. These newer precincts, which saw a lot of speculative development through to the market peak, suffered the highest levels of vacancy in 2011, at close to 20%. The uptake by the aforementioned small businesses has dropped vacancy to between 8.5% and 12.2% for these northern precincts.
Another reason for increasing absorption of space over the last 12 months has been a more active owner-occupier market. The combination of low interest rates and peaking vacancy has meant property prices and mortgage repayment costs have adjusted to a level where businesses are finding cashflow benefits in property ownership rather than paying rent. These businesses are soaking up some of the vacant space in areas where there is an over supply. The availability of office floors between 200m² and 300m² in the northern precincts, particularly Mairangi Bay, is proving to be popular with this sector of the market.
Moving through the coming 12 months, it is likely that uptake of space will continue along a similar vein of positive absorption, but at a reduced level when compared to 2007 and 2008. With a continued aversion to speculative office development, the overall vacancy rate will continue to slowly reduce.
Contact the Bayleys North Shore Commercial team: - 16 Northcroft Street, Takapuna. Phone 489-0999. Visit: www.bayleys.co.nz.