Office Vertical Vacancy Review 2H 2022

ESG continues to grow in importance with the government leading the charge, and the reopening of borders increases offshore investors’ interest in New Zealand’s property market.

October 10, 2022
  • Gavin Read
  • Hina Imran

Amid mixed conditions for both the New Zealand and global economies, this latest edition of our Vertical Vacancy Review demonstrates positive sentiment for prime office buildings across Auckland, Wellington and Christchurch.

Environmental, social and governance (ESG) concerns continue to grow in importance, and government is leading in this space, requiring any new government-owned non-residential buildings valued at over $25 million to have a Green Star rating of 5 or higher, effective 1st April 2022. By this time, buildings valued over $9 million need to meet the same standard.

We’ve seen an increase in enquiry, conversations and meetings with offshore investors, confirming further international capital will likely be invested in New Zealand’s commercial real estate. This is clearly a benefit of the reopening of our international borders.

"We expect rents will continue to rise for quality properties with good tenants and covenants through the remainder of 2022 and into 2023."

Employees will continue returning to the workplace, and the city centres will benefit from increased activity and foot traffic now the government has removed traffic light settings and other pandemic restrictions such as mask-wearing.

Many occupiers are seeking to improve workplace environments to support new flexible working models, which will assist in their strategies to retain and attract talent in a very tight labour market. This is evidenced by JLL’s APAC HR Perspectives Survey, with 56% of occupiers endorsing this strategy.

Quick city overview

  • Auckland - Prime buildings are performing strongly with the divergence between prime and secondary rents continuing to widen.

  • Wellington - The market awaits new or renovated stock to be completed by the end of this year. Much of this stock is prime space and pre-leased. The trickle-down effect in lower grades is expected to be significant.

  • Christchurch - The Garden City remains stable with increased investor interest supported by limited stock available for purchase in Auckland and Wellington.

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