According to new research conducted by JLL, Auckland commercial property is expected to keep pace with demand. The current development pipeline is said to be “relatively well-matched” to the current demand profile which is forecast for the next 10 years.
Between 190,000 and 200,000 square metres of office space is expected to be built in Auckland CBD and Fringe. These figures represent 16% of the current supply. Considering JLL’s forecast of the annual take-up, this supply may take nine or ten years to be absorbed into the market.
According to the initial analysis, the potential development pipeline for the CBD is nearly 300,000 square metres over the next property cycle. JLL Consultant Sarah Dominey suggests that the market is looking at something that is much lower being completed over the period. Several projects are long-term ones and will spill over into the next property cycle or may not make off the ground at all.
Dominey went on to say that the total likely development will take nearly 10 years to be absorbed by the market. This schedule matches the typical cycle for the office market in Auckland, which means the current development pipeline will take the market back to the same level of vacancy, in the same stage of the cycle as it is today.
Office development is on the upturn in the Viaduct/Wynyard Quarter precinct. As a result of continued commitment from tenants, the outlook is positive for the area. Along with the Viaduct/Wynyard Quarter precinct, the Western Waterfront is also active as one of the main development hubs.
Higher vacancy rates and soft rents are having a negative impact on office space in the upper end of the CBD. With the proposed City Rail Link (CRL) targeting the development of three new stations, including Aotea Square, JLL feels that the upper end of the CBD will take a turn for the better.
The fortunes at this end are unlikely to change until 2020-21 at the earliest, which means that it is likely to impact the next supply cycle – as opposed to the current one.
JLL predicts that it is likely to be a couple of years before market rents will justify a new premium development in the CBD. Market rents in the Fringe areas are already high enough to justify new developments, which means the CBD Fringe’s market share of new supply is likely to dominate the CBD over the medium term.
