New Zealand office market snapshot Q4 2022
JLL’s New Zealand Office Market Snapshots provide property insights into how the office market is faring within Auckland, Wellington, and Christchurch.
Our real estate market research is based on data from several reputable sources including on-the-ground insights from our own departments.
With the battle to attract and retain the best talent in the workforce, the ‘flight to quality’ we have seen over the past two years is continuing. This is driving further divergence between prime and secondary office space for lease in cost per sqm as well as uptake of vacant property. Employers are following their employees favouring higher quality workplace environments, and therefore see the investment in prime space as a key strategy in providing fit-for-purpose, flexible offices. The evolving use of the office in this post-pandemic environment requires organisations to reflect on the best use of the workplace to encourage people back to the office and reduce ‘desk vacancy’.
Grade A office space in Auckland CBD has remained stable since 1H22, with vacancy at 6.6%. Secondary follows suit, remaining the same at 16.6%. As more occupiers move to prime offices in response to the shifting demands of the workforce, this divergence is expected to grow. Prime CBD office vacancy decreased to under 10% as noted in our most recent Vertical Vacancy Review, while grade and location across Auckland, Christchurch, and Wellington shows a widening gulf.
Vacancy rates in the Wellington market continue at record-lows, in turn driving up prime rents which are forecast to reach $638 per sqm in 2023. Government tenancies continue to be a strong driver for the office market in the capital. Soon-to-be-completed developments at 15 Customhouse Quay will add 3,600sqm of office space in the next few months.
Secondary office space in Christchurch showed increased vacancy from 6.0% to 8.0% primarily due to space arising on Victoria Street. Further out of the CBD, vacancies on Wairakei Road drove secondary suburban vacancies up to 24.4% (a difference of 13.9%). More than 4,000sqm of office developments are in the pipeline, much of that space pre-leased, with expected completions in 2023 and 2024.
Average net rents and yields are stable in most markets.
- What key developments are in the pipeline across our biggest cities?
- What projects and trends are continuing rental growth in the capital?
- How will the increasing interest rate environment impact yields?