Falling Vacancies And Rising Rents Reflect Strong Demand For Prime Office Space With Capital Waiting In The Wings

October 2022 – Demand for quality office space has remained strong through the third quarter of the year with vacancy decreasing or stabilising in our three major centres, according to JLL’s latest Office Vertical Vacancy Report, out today.

In Auckland, Wynyard Quarter continues to thrive with vacancy stable at around just 4%, while prime office vacancy in the CBD has now fallen below 10%. Right across the City of Sails, average prime rents have increased 2.3% on the last quarter.

In the capital, prime office vacancy is down to just over 2.5%, putting upward pressure on rents. Meanwhile, Christchurch’s vacancy rates and rents have remained essentially unchanged.

Despite challenging global and domestic economic conditions, JLL’s Head of Research Gavin Read expects rents to continue to rise for quality properties with good tenants and covenants through the remainder of 2022 and into 2023.

“Premium locations with strong, long-term occupier-owner relationships continue to be highly desirable. This is particularly so in Auckland, where the latest wave of new builds and refurbishments are expected to set new rental benchmarks for the CBD,” says Read.

Following the reopening of our borders, Read is equally positive about the longer-term picture, with increased interest from offshore investors signalling a likely inflow of international capital into the sector.

“There are lots of positive signs out there, but it’s important commercial real estate continues to evolve to meet the needs of occupiers and employees such as supporting new flexible working models and meeting Green Star rating requirements.”

Key highlights from JLL’s latest Office Vertical Vacancy Report

Auckland CBD and Wynyard Quarter

• Auckland CBD prime vacancy rate has decreased from 13.3% to 9.8%.
• Average net prime rents have increased by 2.3% on the previous quarter to $543 per square metre.
• New buildings like 50 Albert Street and the refurbishment of 1 Queen Street are expected to set new rental benchmarks for Auckland CBD: upper end rents for prime buildings may increase to $760 per square metre.
• Sublease vacancy is also decreasing, down to 4,868 square metres from 8,975 in the CBD.

Wellington

• Prime office vacancy decreased from 4.16% to 2.58%, representing an uptake of 5,569 square metres of space.
• Limited supply and strong demand for space from government continues to support low levels of vacancy and put upward pressure on rental levels.
• Upper end of prime gross rents are up 0.7% to $705 per square metre.

Christchurch

• With no prime office-only new builds in the CBD pipeline and low vacancy rates, the outlook for Christchurch remains stable.
• Vacancy rates had a slight quarter-on-quarter decrease from 4.6% to 4.0% while net rental rates for prime CBD office remained at $360 per square metre.

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