Research

Vertical Vacancy Review Q4 2021

Businesses remain optimistic and are anticipating a post-lockdown bounce as evidenced after previous lockdowns.

November 08, 2021
Contributors:
  • Gavin Read
  • Lisa Chen

This latest edition of our Vertical Vacancy Review demonstrates positive sentiment across the Auckland, Wellington, and Christchurch office markets.

From an occupier’s perspective, while workplace strategies continue to evolve, it is now widely established that the office remains integral to businesses’ longer-term strategies.

A competitive labour market and the need to attract/retain employees means occupiers must look to provide better, more collaborative and sustainable office spaces. The ‘flight to quality’ trend will therefore continue to support prime office asset performance maintaining low vacancy and stable rental growth.

From an investor and owner’s perspective, tenant quality and long-term viability of their business remains a critical focus as owners seek to de-risk future returns. The low interest rate environment continues to support investor demand for good quality assets in the right location with good covenant and WALEs.

We are however anticipating decompression of yields from 2022/2023 in line with rising interest rates as the RBNZ started rising the OCR in 4Q21. On a city-by-city basis:

  • Auckland - flight to quality remains with grade divergence widening and occupiers continuing their shift to the waterfront.
  • Wellington - with limited stock coming to market, the tightly held Capital is hanging on for the new offerings in 2022 and 2023.
  • Christchurch - stability remains with increased investor interest supported by limited opportunities in Auckland and Wellington.

Read more about the Auckland, Wellington, and Christchurch office markets in our October 2021 report.

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