Research

Vertical Vacancy Review 1H 2022

ESG is top of the list for occupiers, owners and investors in a market with increasingly positive sentiment.

May 31, 2022
Contributors:
  • Gavin Read
  • Hina Imran

The latest edition of our Vertical Vacancy Review shows increasingly positive sentiment across the Auckland, Wellington and Christchurch office markets.

The great return to the office that was expected for early 2022 in the end was muted because of New Zealand’s red traffic light setting in late January caused by the Omicron outbreak.

Uncertainty and apprehension reigned supreme for both employees and employers due to the unknown duration and level of impact it would have on the workplace. However, with cases now decreasing and restrictions easing, demand is expected to remain high for premium buildings in good locations.

From an occupier perspective, the trend from 2H21 continues. Workspace strategies are changing with an increase in requirement for employee wellness and sustainability initiatives. In order to continue to attract employees back to the office, occupiers need to be offering flexible workspace arrangements, new technology such as IT enabled meeting rooms and quiet spaces.

For investors and landlords, tenant quality and long-term viability of their business remains a critical focus with owners increasingly seeking to de-risk future returns. Yields remain unchanged on the back of limited transactions. The rising interest rate environment is expected to gradually have its impact on yields towards the end of 2022 and into 2023.

In addition, all key stakeholders increasingly have environmental, social and governance considerations at the top of their list as they review current and future strategies.

This has been taken into consideration as many new prime office buildings are seen to be 6-star green buildings. The delivery of these projects will rely on various factors including pre-commitment, ability of the construction industry to keep up, and how the Government’s post-pandemic responses roll out.

Quick city overview
  • Auckland – Prime buildings are performing well with a growing divergence between rents for prime and secondary buildings
  • Wellington – Predominantly A-grade stock currently in construction set to have a trickle down effect in lower grade stock
  • Christchurch - Increased investor interest in the region supported by limited stock in Auckland and Wellington

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