Auckland's southern CBD has become the latest investment hotspot, as unsatisfied demand for core CBD stock leads investors to seek value in emerging precincts.
Blair Peterken, Director of Capital Markets at Colliers International, says investors are continuing their drive to get a foothold in Auckland CBD real estate.
But he says there simply isn't enough supply to satisfy demand.
"A shortage of stock, combined with the CBD's continued growth, has led to the emergence of precincts within the CBD that have not typically been considered by investors.
"The CBD's southern precinct in particular has been a beneficiary of this pent-up demand, with some significant sales transactions confirming investors see value in this emerging market."
Highlighting this trend is the sale of a 10-level office building at 110 Symonds Street for $38.5 million, which was brokered by Peterken in October.
Previously known as the CallPlus Business Centre, the 8,700sq m property is prominently located across from the Cordis Hotel. It comprises two office towers, accessed via a central core, over two podiums.
Peterken says the property's potential for value-add and capital growth was a key driver in the purchase.
"The new owner has the opportunity to refurbish and lease the vacant office space, and to add value by modernising numerous aspects of the building."
The property is one of two office buildings on Symonds Street to change hands in October. A 10-level office tower at 57 Symonds Street sold for $22.75m.
Both buildings are in a precinct previously known as Auckland's learning quarter, due to the high concentration of international schools, tertiary institutions and student accommodation.
Peterken says the area's character has started to change in the last couple of years, as office tenants return to the precinct.
"The key drivers are more affordable rents, higher on-site car parking ratios, less traffic than the CBD core, and the prospect of even greater accessibility once the City Rail Link's K'Road station is completed.
"Office rental rates are very competitive compared with lower Queen Street, which makes it easier to attract tenants, who are chasing more affordable rents. Amenity along K'Road has also improved dramatically over the past 18 months."
Peterken says there has also been a surge in sales activity in the area around Myers Park.
Two significant transactions took place in July, with 345 Queen Street selling for $38.96m and 48 Greys Avenue changing hands in a mortgagee sale for $20.8m.
Both six-level office buildings are located off Mayoral Drive, just south of the Aotea precinct, in a pocket of office, education and apartment developments.
Peterken says the City Rail Link will improve accessibility even more once it is completed in 2024.
The 3.45km twin-tunnel underground railway will include a new station at K'Road, bringing greater accessibility to upper Symonds Street and Queen Street.
The new Aotea station, between Wellesley Street and Victoria Street West, will service the Myers Park precinct.