Offices in the greater Auckland area are getting empty.
The office vacancy rate in downtown Oakland, residential areas and the core business district of Lake Merritt reached 35.7% in the second quarter, an increase of 1 percentage point from the previous quarter. According to the San Francisco Business Timesciting data from Cushman & Wakefield.
The increase in vacant cubicles marks a rising fourth-quarter office vacancy rate in the 6.3 million-square-foot submarket.
Real estate experts say the hollowing out of Auckland’s core office buildings is caused by a thousand cuts, not the loss of key leases. This trend started in 2019 and then got worse during the pandemic.
The growth is largely driven by what Cushman & Wakefield’s John Dolby calls “dinks and dunks,” in which small pockets of space are either sublet or given up by office tenants whose leases are expiring .
“There’s 5,000 square feet here and 10,000 square feet in another building,” Oakland-based Dolby told The Business Times.
He said vacancy rates in core business districts were not expected to climb further.
He said the reduction in vacancies would require office tenants to undertake major build-outs, or out-of-market tenants to start moving into Auckland.
The two incidents made Auckland’s commercial leasing market more crowded in the 2010s, turning the city’s office market into a One of the strictest in the country.
“The majority of deals in 2016, 2017, 2018 were from new start-ups and tenants outside the market,” Dolby told the paper.
Now that’s less likely. While one-third of San Francisco offices are empty, leasing rates there have fallen, making the local market more favorable for tenants.
“As affordability improves in San Francisco, people can stay in San Francisco, which means fewer opportunities in Oakland,” Alexander Quinn, JLL’s head of Northern California research, told The Business Times.
— Dana Bartholomew