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Bayleys Research


ANNUAL 2008 SOUTHERN CORRIDOR REPORT

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VACANCY RATE HITS RECORD LOW

The overall office vacancy rate in the Southern Corridor has reached a new record low of 4.5%, according to the latest Bayleys Research office vacancy survey. The significant decrease in vacancy rate from the 7.6% recorded in January 2007 is once again a result of strong leasing activity in the area. A number of tenants are attracted to office space in the Southern Corridor due to the lower occupancy costs in comparison with the Auckland Central Business District (CBD) and City Fringe, easy access to the motorway, with further upgrades continuing, and the rise in the quality of building services provided.

 

 

The Southern Corridor precinct extends along Great South Road from Manukau Road to the Penrose Interchange. The southern end of the precinct has experienced an influx of development over the last few years with large, modern office park developments now typifying the area. The northern end of the precinct consists of a number of smaller scale office buildings built in the 1970’s and 1980’s and is largely influenced by its proximity to the Newmarket commercial and retail centre.

 

The Southern Corridor’s net lettable office space continues to increase with almost 160,000m2 of office space in the surveyed area. While the net lettable area of B and C-grade office space has been relatively consistent over the last seven years, totalling around 80,000m2, A-grade office space continues to be the most popular for tenants and developers, with just under half of the office space in the Southern Corridor now regarded as A-grade space.

As can be seen in the graph above, the overall vacancy rate since January 2002 has been heavily influenced by movements in A-grade space. In January 2003, when vacancy rates hit an all time high of just under 20%, a number of A-grade developments were undertaken such as the Millennium Centre, Meridian Centre, Columbus Centre and Stanway Business Park.

While at first there was slight apprehension in the market as to the level of absorption required to reduce vacancy rates, any such concern was soon quashed with vacancy rates dropping by almost 13 percentage points by the following year. A similar trend occurred in January 2006 with the completion of the second phase of the Millennium Centre and Central Park adding approximately 26,000m2 of office space to the precinct and increasing the overall vacancy rate by five percentage points to just over 10%. However, since this time steady leasing in the precinct in concert with efficient space management from Goodman Property Trust, the dominant property owner in the area, has enabled vacancy rates to fall to a new record low.

 

 

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