An interesting piece was hidden in the Herald’s business section yesterday from Chris Dibble, the national research manager at Colliers International talking about the shortage of office space in the central city.

The amount of vacant office space in the Auckland CBD has been shrinking for the past three years as the economy grows, business confidence reaches record highs and supply stays still.

The limited amount of available office space in Auckland’s CBD reached all-time lows at the beginning of the year. There was around 4000m² of prime vacant space and 100,000m² of secondary space.

The critical shortage of prime office space led to a number of tenants staying put or searching for suitable office accommodation in the fringes of the city. The limited number of options for tenants has led to rents increasing by up to 5 per cent a year over the past year and incentives reducing to between 5 per cent and 10 per cent.

To put that shortage of prime space in perspective, a single floor in Auckland Transport’s Downtown Carpark is about 6,000m² – but that vacant office space will be broken up and spread across the entire CBD. It’s no surprise then that two things are happening.

  1. That developers are looking to build and there are a number of projects in the pipeline
  2. That growth in CBD employment numbers has slowed down

Addressing each of these two points, firstly the article’s author highlights some of developments that have happened and that are planned.

To take advantage of the demand, developers have ramped up their activity significantly, with almost 100,000sq m of space being refurbished and developed.

The amount of potential pipeline supply and developments currently under way represent 18 per cent of overall supply or 56 per cent of prime supply. This is higher than in Sydney at 12 per cent and 24 per cent respectively.

In the last decade, private company Mansons TCLM has been the most prolific developer of office space in the CBD and city fringe, developing 152,000sq m.

Mansons have recently announced they are looking to develop their second high-rise office tower in the CBD on the existing NZME. site that will be vacated by middle to late this year. Initial target dates for completion of the tallest office tower in the CBD comprising 40,000m² is for early 2019.

Between 2015 and 2020, more than 168,000m² of office space is forecast to be developed in the Auckland CBD and adjoining Victoria Quarter including Fonterra’s HQ, VXV3, 151 Victoria St West, Precinct Properties’ Downtown Centre and Wynyard Quarter redevelopments, Manson’s CBD Tower and other smaller developments aggregating to around 20,000m².

The transition of tenants to new buildings over the next decade will see a rise in the vacancy rate from its cyclical lows, although the overall rates will not reach the vacancy rates seen in the late 1990s. This is due to the unprecedented pent-up demand for office space which will insulate the market.

As a comparison of development cycle time frames over the past two decades, the Auckland CBD grew by 100,000m² between 1992 and 2000, 2001 and 2006 and 2007 and 2014.

I think that’s the first time I’ve heard about Manson’s plans for the Herald site on Albert St which is in for a massive amount change in the coming years with both other developments and the CRL. Combined with the other developments Colliers are saying more than 168,000m² will be developed. To put that in perspective New Zealand offices currently average about 15m² per person although in some places overseas the average is 10m² per person. That would suggest the new developments would allow enough space for 11,000 to 17,000 more people in the central city.

That leads us to number 2, central city employment numbers. These numbers are of course being closely watched by the government which listed them as one of the targets for an early start to the CRL. The target is “an increase in Auckland CBD employment of 25 percent over the February 2012 estimate”. The February 2012 result was about 98,000 employees so there would need to be an almost 25,000 increase in employment – something made more difficult by the fact that there are a number of offices being converted into apartments.

We don’t have the 2015 data yet but as of February 2014 employment in the area had increased by about 2,700 since 2012, well short of what would be required. Given there also doesn’t seem to be enough new capacity coming on stream for that target to have a chance of being achieved.

We’ve talked before though that we should really be taking a wider view of the city centre when looking at employment numbers. As an example the thousands of workers at the Hospital or in Newmarket and other fringe locations simply aren’t counted even though employees face the same transport capacity issues as the city centre. Also as Chris notes the shortage in the centre is pushing businesses to look on the fringes and they are showing good growth. The table below shows the employment numbers in the CBD as well as the CBD plus the City Fringe. As you can see the area including the city fringe has been growing strongly.

Employment CBD + Fringe 2000-2014

And the map below shows which areas are covered, obviously yellow for the CBD and blue for the fringe areas.

Employment CBD + Fringe Map

This is just one of the reasons why I think the CBD job growth targets are silly. Another is that it also fails to recognise that there are a number of other people that travel to the city daily. As an example central Auckland is very much an education town too. The University of Auckland and AUT combined have almost 70,000 students (although not all in the central city) and that equates to an equivalent of about 52,000 students full time. Those students need transport solutions just as much as office workers.

There is no where else in Auckland that has anywhere near the number of jobs let alone students as the city centre does and with so much residential and commercial development happening that isn’t going to change. Auckland is in for an exciting few years that will contribute towards dramatically re-shaping the city.

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27 comments

  1. You’re right the employment target is pretty silly. Surely if PT demand is growing faster than expected then there’s a logic for needing CRL sooner than expected. Because CRL is designed to resolve a PT capacity issue.

    It’s surprising the govt hasn’t taken the massive rail patronage growth and council pushing back CRL to 2018 for starting the main works as an opportunity to agree time frames and kill off CRL as a political issue. Maybe they’re waiting for the right time to do just that?

    1. “You can have the transport capacity you need to grow employment once you’ve proven you don’t need it by growing anyway”

      1. Exactly; they are so hoping business will be squeezed out to good drive-only suburban business parks. They like how Christchurch is going; shaped for total auto-dependency, they’ve achieved it there and want it here too. A very bizarre anti-efficiency and anti-productivity reflex policy. What leads what? Do they want this urban form because they only want to build roads; or are they only building roads because they want this urban form?

        1. I think it is in National DNA to build roads because they want that form urban form. I think they used to do it to create the ‘right’ sort of voter.

          But now specialist road building contractors are probably National party supporters because they know which side of the bread is buttered.

    2. How about tourist, shoppers, restaurant customers, and night life people? When the city shop opens for late, there will be a strong case for transit.

  2. “The University of Auckland and AUT combined have almost 70,000 students (although not all in the central city) and that equates to an equivalent of about 52,000 students full time. Those students need transport solutions just as much as office workers.”

    The student population for UofA will only increase in the CBD area now that the Tamaki campus is being wound down and the move to the Grafton Campus is underway.
    This is a once in a generation (or more) shift.

    So ignoring this major change is really ignoring a(nother) elephant in the room.

  3. The target is just dumb and dumber at every level: logically, logistically, politically even. The CRL isn’t (only) about the CBD, it’s about the whole network.

    On the other hand a target for jobs growth in Northland (or maybe better, Matakana) before building the holiday highway might make sense.

    1. Nah, don’t you know that everything works in reverse outside of Auckland. Just the risk of losing one parliamentary job justifies committing new infrastructure…

  4. Real estate brokers have to be upbeat in these kinds of commentaries because it is in their interest to encourage investment. I don’t mean to say that I take their information with a pinch of salt, but I think he’s describing a best case here. Not all of those projects may come on line – it depends mostly on timing and available financing – but there is clearly a need for prime space. The supply of sub-prime space really is a lot. Depending on how rents go, there could be tenants in prime space today that find it advantageous to move down a step to save a few bucks/ sqm. (It would be helpful to know average rents for each class, and amount of sqm of each class.)

    But on the transport implications, I agree with everyone else. In a constrained market it’s hard to sell space in anticipation of capacity increase in infrastructure (unless that infrastructure runs through the basement of the project). And the effect may be to drive up rents to a level unaffordable to some tenants, which would be counter-productive to getting the CRL done. The government’s requirement is arbitrary and intended to give them political cover, in other words, they can say to people in the wopwops that they’re keeping Auckland on a short leash and making them work for their supper. It’s no way to run a railroad.

    1. This is a great opportunity for urban planning to fill a gap left by macroprudential policy. If Auckland Council truly cared about financial stability, they’d establish a building height limit _just under_ the height of the Sky Tower, and enforce it vigorously!

  5. I have asked Matt for the figures for Manukau City Centre, and the five big heavy industrial complexes for relative comparison against the CBD

    I know the CBD would outstrip but the comparison would be good to see especially for planning and acknowledging that South Auckland commutes within herself (so an East-West commute pattern) according to the Ministry of Transport http://voakl.net/2014/08/21/aucklands-commuting-journeys-a-series-major-non-city-centre-employment-centres-overview/

    1. Which is presumably one of the reasons this blog has talked up the benefits of integrated public transport and planning at Manakau City Centre.

      And even having non-CBD oriented rail transport, which is pretty rare in the Anglo-settler-sphere, so that trains from the Western and Eastern lines and direct from Papakura to Manakau via a new triangular junction might all be good ideas.

      1. Papakura to Manakau? That’s about 529kms!
        Starting the CRL early would mean the nats having to admit they were wrong(gasp!). They’d sooner leave their granny out on an ice-floe to die before doing that.

        1. If you’re going to go all the way to Manakau, you might as well go a little further to Waikanae, so you can connect with Tranz Metro trains.

      2. I have no idea who you referred to as “this blog” Riccardo but I can say Talking Auckland has for the last four years talked up those benefits of integrated public transport and urban planning in Manukau City Centre.

        Amongst other things all great and small are things like the Manukau South Link (which Transport Blog still opposes) which has re-entered the Long Term Plan discussions again (whether we get it onto the books this time is not known until next Month).

        Also in talking to Gary on here, keeping an eye on East-West Connections, Southern Auckland commuting patterns, the industrial complexes is something else done as well.

        Granted for me personally I live in the South so will tend to watch things down here more than other areas of Auckland.

    2. I believe the second largest employment zone is the East Tamaki / Highbrook area; how does this compare to the CBD? The movement of people and goods to this area would surely be in a more East-West direction? But the majority of our transport proposals both road and rail are in a North-South direction; is this what you are asking Ben? I also believe that it is something that needs to have more focus.

      1. Pretty much Gary.

        I ask because when I look at that Ministry of Transport report (which I linked in my original comment) I see quite a bit of east west flows in Southern Auckland.

        Now this is not discounting we still have North South movement as the Southern Line and Motorway will prove that one. But sole focus on this?

        Again Southern Auckland if the MoT report is anything to go by commutes within herself thus east west in a round about way.

        So Council, AT, Kiwi Rail, Government and NZTA need to have this in mind (which they do and dont).

        1. I agree with this entirely; how much traffic do you think an East-West motorway (and/or rail line) would remove from the Southern motorway if it existed? My bet would be quite a lot more than most people think as traffic would no longer have to stick to the North-South routes that are currently the only options. I think you see the results on the southern motorway around Mt Wellington and Ellerslie where I think much of this competing traffic is forced to flow together.

          Would make an excellent case study and post on this site with the results once known.

        2. The East West Link as it is otherwise known as and as NZTA are looking at – I think Option C or D if I recall.

          Supplemented by 10-15 minute buses from Botany to Manukau and out to the Airport for the southern east west link

      2. East Tamaki is nowhere close to the CBD.

        Second biggest employment area is the Onehunga/Penrose/Mt Wellington/Otahuhu industrial area which has about 77,000 employees. Followed by:
        North Harbour/Albany area is around 32,000
        East Tamaki area is about 30,000
        Manukau/Wiri area is about 28,000
        Airport about 23,000
        Wairau and Taharoto Rd area about 22,000
        Henderson about 9,600
        Lincoln Rd about 9,000
        Takapuna about 9,000
        Rosebank about 8,000
        New Lynn about 6,000

  6. “The February 2012 result was about 98,000 employees so there would need to be an almost 25,000 increase in employment – something made more difficult by the fact that there are a number of offices being converted into apartments.

    We don’t have the 2015 data yet but as of February 2014 employment in the area had increased by about 2,700 since 2012, well short of what would be required. Given there also doesn’t seem to be enough new capacity coming on stream for that target to have a chance of being achieved.” Do these numbers include the hundreds (if not thousands of construction workers in the CBD? e.g. Those digging the big holes – including the first stage of the CRL, those pouring concrete, electricians, glaziers, plumbers, inspectors etc). How about Police, and other services etc? people working in bars/restaurants etc. These are all workers in the CBD are they included in the numbers or is it just office workers only?
    “This is just one of the reasons why I think the CBD job growth targets are silly. Another is that it also fails to recognise that there are a number of other people that travel to the city daily. As an example central Auckland is very much an education town too. The University of Auckland and AUT combined have almost 70,000 students (although not all in the central city) and that equates to an equivalent of about 52,000 students full time.”
    I don’t have figures on Auckland Uni/AUT staff but would imagine perhaps 1 lecturer per 100 students and then perhaps another 2 support workers per 100 students (library, admin, management etc). So that is 3 workers per 100 students for example which would equate to 2100 workers. Are they included in the numbers?

    1. I agree that if students are not included in the total because technically they aren’t “employees”, a meaningless distinction for transport planning purposes, they should be. As for construction workers, they shouldn’t be because they aren’t there all the time for long term planning purposes. If you want to factor in *some* construction workers as a guess, to cover that option, you could do that but it would be hard to substantiate.

      1. I’m thinking in terms of trying to get the governments target (which is a joke) to get CRL built.
        I agree that the actual total should be about total people in the CBD between 6am and 6pm this would of course cover residents, workers, students, tourists etc. I bet that this total has risen by 25% (the government growth target) over the past few years.

    2. It’s based on your employer’s address. So yes, people in bars/restaurants will be counted, Police will be counted if their station is downtown, and construction workers won’t be counted (they “work” at wherever the yard is).

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