It is widely understood that demand for high-end Auckland CBD office space has outstripped supply; but what is less well known is that much new office space bypasses the open market altogether.
This pre-leasing of office space ahead of building completion is now "de rigueur", says James Kellow, New Zealand Mortgages & Securities (NZMS) director.
Kellow, who heads Auckland's largest non-bank property development financier as a joint venture with Mansons TCLM, says the fact that existing office buildings continue to be converted into hotels and apartments is adding to the shortage.
"These re-purposed buildings are not being replaced fast enough with new high-end office stock in the inner city," he points out.
That is despite the fact there are plenty of cranes on the skyline, and are construction projects under way in the CBD, he adds.
"Significant new-build projects include Precinct Properties' Commercial Bay, opposite Britomart; and Manson TCLM's $250m office development - between theAir New Zealand and Fonterra buildings in the Wyndham Quarter.
"Sure, these will go a long way towards delivering the international-quality CBD office space now required.
"However, difficulties remain, and partly because so many new buildings are being pre-leased ahead of completion."
Mansons TCLM recently completed a building on St Georges Bay Rd, Parnell, with Xero locked in as anchor tenant ahead-of-time.
A new Manson-constructed, Augusta-owned building on the Broadway roundabout, at Newmarket, was also pre-leased by Mercury and Tegel.
The $300m Park Hyatt on Halsey St is probably the best-known new hotel now under construction in Auckland's CBD.
However, hotel developments in Fanshawe, Queen, Cook and Quay Sts are, for the most part, office building conversions.
"We know what hotels are coming, because NZMS is increasingly in the business of funding commercial developments," says Kellow.
"Developers sometimes struggle to secure bank finance for developing commercial buildings for offices. And it's clear that a lot of bank funding lately has headed towards the residential sector.
"What's more, with so little development land available now in the CBD there are just not the suitable sites required for this kind of development."
Kellow says Mansons TCLM has 3100sq m of land left for new office development at 46 Albert St, the former home of the New Zealand Herald.
In August, Manson TCLM sold an 1100sq m portion of the cleared site for $31m, and a hotel of around 37 levels is planned there, says Kellow.
"It would be very difficult to find a commercial building in downtown Auckland that has lost value; the only exceptions being buildings landlords have simply not kept up.
"You've got to remember that many of the businesses today looking for new office space see things through the 'international lens'.
"Overseas-based property managers are making the decisions, based on international specifications, and hence they demand international-grade buildings.
"But as well as all the technology and environmental requirements, they want large floor plates suitable for connectivity, creative work environments, hot-desking, mixed-use spaces, etc."
Kellow sees the real challenge as being that much existing CBD office stock falls far short of the standard required.
"With desirable contemporary office stock limited and overall vacancy rates low, rents are still going up," he says. "So central city can expect a fresh wave of domestic and international investment in 2019 with healthy commercial property yields increasingly on offer."