Report

Auckland CBD Office Market Building Quality and Typology Considerations

CBRE took a comprehensive approach in reviewing existing building quality gradings in terms of methodology and typology composition to better reflect a broader range of building and locational features of importance to the market.

November 25, 2024 12 Minute Read

By Zoltan Moricz Bianca Cornforth

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Key Points:

  • Typology changes boost the top end of the market.  Adding campus and character typologies expanded the Premium quality grade to 15 buildings compared to the previous 7.  Premium grade reflects the ongoing prominence and demand for the Tower typology while including other very high-quality buildings of campus and character typologies.
  • Higher environmental performance correlates with higher occupancy metrics - but not universally.  A positive relationship between high environmental ratings and high occupancy performance is most evident at the top end of the market. Vacancy statistics show some challenges for lower quality sustainable space. A more nuanced look behind the data, however, highlights the difficulty of isolating causal factors behind building performance, whether for occupancy, rent, or yield.  In every case, a range of factors work together to drive outcomes.
  • Occupancy trends reflect the importance of the full suite of location and building attributes featured in occupier decision making processes.  Sustainability is but one of these. When buildings are lacking in relation to attributes such as public transport connectivity, broader geographic location, and floor configuration, to name the most important ones, sustainability credentials on their own can be insufficient to provide a compelling enough positive offset for some occupiers.
  • Occupier sentiment aligns with the quantitative evidence.  More than three quarters of respondents in CBRE’s 2024 New Zealand office occupier sentiment survey have adopted sustainability measures or require formal Green Star or NABERSNZ certification.  26% of occupiers require formal Green Star or NABERSNZ certification.  A more pragmatic approach is adopted by other occupiers who are taking steps towards sustainability without requiring formal certification of their office building/space as a defined criterion of occupancy.
  • Importantly, the distinction in sustainability preferences remains compelling across the quality of currently occupied space, and occupier size is also apparent as a differentiator. There are also clear opportunities to drive greater demand for green space. Three quarters of current occupiers in C-grade space not having a firm view if they would pay more to be in a sustainable building provides scope for better engagement with this market segment on the rationale and benefits of more sustainable buildings.
  • Even at current demand levels, the market is arguably undersupplied with sustainable building stock. Nearly a third of Auckland occupier sentiment survey respondents seek 5 and 6-star Green Star rated spaces and are willing to pay a rent premium for these.  This demand base exceeds current Auckland office stock (CBD and Non CBD combined) that is 5 or 6-star green rated, highlighting the potential for growth in the sustainable real estate market.

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