City fringe office growth slowed in 2003, and the net amount of office space fell for the first time since 1997 after transfer to the apartment sector.
Bayleys Research said in its annual January survey of the market, released this week, the net effect of transfers out of secondary space into new A grade space, the addition of some uncommitted new space, demolitions to make way for apartments & sale for conversion to apartments was that the overall fringe office vacancy rate was slightly down on the previous 2 years at 9.7%.
“While a number of new office developments did come on line during 2003, the amount of new space added was well below levels of preceding years.
“However, this slowdown will be short-lived as the city fringe is set for another wave of strong growth, with a number of new developments planned or under construction,” Bayleys Research, headed by Gerald Rundle, said in the latest report.
Bayleys includes 5 localities in its definition of the city fringe office market â€“ Parnell, Grafton, Newmarket, College Hill & Newton.
In those areas, it said only 3.5% of A grade space was vacant, 11% of B-C grades was vacant & more than 27% of D grade was vacant. That’s after the researchers removed a number of mostly redundant vacant properties from the inventory.
Newmarket led fringe growth from 200-02 as Symphony Group Ltd redeveloped the Abels site on Carlton Gore Rd, but the only notable addition last year was Marac House, occupied by Marac Finance, on the corner of Gillies Ave & Teed St.
The development slowdown allowed the leasing market to catch up.
Bayleys said Newmarket’s overall vacancy fell 4 points to 5.7% in a year, its second-lowest level since 1997, but construction of another 16,000mÂ² in several buildings would test the vacancy level.
Existing Newmarket businesses had shown a high level of precommitment to this new space.
ANZ Bank will move from its Broadway premises to a new ANZ House being built on Carlton Gore Rd
A 4-level building is being erected at 139 Carlton Gore Rd
A 7-level building is under construction at the corner of Khyber Pass Rd & Kingdon St.
Vacancy remains around 8%. Main occupants remain businesses in communications, marketing & media and travel.
College Hill’s office vacancy rate has see-sawed, from 8% in 2002 to 11% in 2003, back below 10% in January 2004.
The main reason for an improvement was the removal of just over 7000mÂ² of redundant space for apartment conversions.
The Grafton Gully motorway project has been under way for the past year and has had a major impact on leasing.
Grafton’s vacancy rate hit 15.5%, but Bayleys said completion of the roading network would position Grafton better. Health-related businesses wanting to be near Auckland Hospital led 2003 leasing, and Bayleys Research understands more health-related businesses plan moving to move there.
Parnell’s vacancy rate rose 4 points in a year to just under 11%. Bayleys Research said its small office area made it more sensitive to change.
Leading fringe office tenants are in the marketing & media, communications and information technology sectors. The space occupied by the education sector fell by just over 11%.
Bayleys Research said local opportunists in the education sector faced difficulties, but larger experienced offshore companies were playing a bigger role in the education market, so it was too early to gauge the full extent of the sector’s downturn.