Grafton Rd vacancy rate hits 23pc
Particularly high office vacancy levels in the Auckland CBD fringe suburb of Grafton could result in Grafton Rd becoming this country's equivalent of London's Harley St.
According to commercial real estate specialist Jones Lang LaSalle, some recent tenant departures have pushed the office vacancy rate in Grafton Rd up to 23 per cent.
But fortunately for landlords, there has recently also been increasing interest in the area from tenants in the medical sector looking for space close to Auckland Hospital and the medical school, both of which are just around the corner from Grafton Rd.
Jones Lang LaSalle leasing broker Laura Osborne said Grafton Rd's commercial office strip has suffered more than most CBD fringe suburbs over the past few years and at least every second building currently had some vacant space in it.
According to Jones Lang LaSalle's research and consultancy division, Grafton Rd has one of the highest vacancy rates in its recent survey of Auckland office space, compared with the nearby Newmarket and Symonds St precincts, where vacancy was 14.5 per cent and 16.1 per cent respectively, and the overall vacancy rate for CBD fringe suburbs of 18.5 per cent.
Grafton Rd has a fairly short commercial strip and most of its office buildings were built in the 1980s. Its tenants have mostly been a mix of small- to medium-sized companies and various departments of the University of Auckland, which has its main campus on the other side of Grafton Gully.
Until recently, there wasn't a lot of interest from tenants wanting to move into the area, which made vacant space hard to fill.
But Osborne said a noticeable increase in tenant interest that started about four months ago had showed no sign of slowing down.
By far the biggest group had been businesses in the medical sector who were attracted by its proximity to the hospital and medical school.
These ranged from companies supplying medical implants to medical specialists who did work for the hospital as well as having their own private practices.
One such company was Optimal Clinical Trials, which recently leased space at 89 Grafton Rd.
The company's main reasons for locating in the area were its proximity to the hospital and nearby motorway access, which was convenient for clients visiting their offices, Osborne said.
And a medical specialist recently purchased an entire building in the strip so that he could have his clinic located close to the hospital, Osborne said.
That could lead to a medical hub developing along the Grafton Rd strip, similar to the famous Harley St cluster of medical specialists in London.
Medical specialists often work collaboratively and will share premises and administrative staff to minimise their costs, especially when they are providing complementary treatments.
So when some treatment providers move into an area, they often attract others.
But other businesses were also showing renewed interest in Grafton.
"A lot of people see it as a drive- through suburb," Osborne said.
But the same reason that so many people drove through it also made it a great location for business, because it's so centrally located.
The bottom of the road heads to Parnell, the port and downtown and also connects directly to the motorway, while the university and CBD are on the other side of the gully, and at the top of the road are the hospital and medical school with Newmarket beyond.
Grafton also offered cost benefits compared with other fringe suburbs.
Most of the available office space along Grafton Rd was for lease at around $180 per square metre a year, with operating expenses averaging around $70 to $80, Osborne said.
Just over the hill in Newmarket, $180 was the starting point and rents went up from there, she said.
Car parks were also cheaper, renting for $30 to $40 a week in Grafton compared with $50 to $60 in Newmarket and at least $70 for a park in a CBD building, Osborne said.
However, there was one other benefit of locating in Grafton that was hard to put a price on, but which attracted many of its tenants, she said, and that was its view.
Grafton Gully is unusual for a suburb so close to the centre of the city because its western side is still covered in bush, which leads up to the office and apartment buildings on the Symonds St ridge, creating a very attractive outlook by day and night.
The other side of Grafton Rd overlooks the lower reaches of The Domain, which also provide a pleasant outlook.
That puts The Domain within lunchtime walking distance from offices along Grafton Rd, and new cafes are also planned for the area, which all contributes to its amenity value.
Osborne is currently dealing with vacant space in seven buildings in Grafton Rd, with the spaces ranging from multiple floors to small part floors.
- © Fairfax NZ News