See below a summary of the mega trends within New Zealand’s office market, plus an outlook on the next 12 months for the market.

Biggest Trends

Flight to quality

Occupiers are seeking higher amenity and modern buildings to help draw staff back to the office and to address obsolescence issues with older buildings. Tenant mandates for sustainable buildings are further cementing this trend and often supporting their decisions to relocate.

Fewer desks but more collaboration space

Post-pandemic ways of working (remote and hybrid work) are typically resulting in organisations needing fewer desks but more collaboration space within their offices. Many organisations are revisiting their work from home policies typically with a view to increasing the time their people are working at the office.

Seismic headaches

Seismic challenges are heavily influencing some markets, most notably Wellington CBD. Poor assessment results are leading to some buildings becoming largely untenantable until resolved. This issue is further complicated by potential changes to seismic assessment standards which are leading some landlords to pause before investing in strengthening.

Outlook for the next 12 months

Two-step rents

The flight to quality is resulting in low vacancies and rental growth amongst modern properties in desirable locations. Properties that are dated or poorly located are needing higher incentives to maintain face rents amongst weaker demand.

Yields stabilising at higher levels

Signals that inflation and long-term interest rates are peaking means yields are likely to stabilise after a period of softening. Lower numbers of sale transactions means there is less evidence available to showcase this trend. Sentiment amongst agents indicates the investment market remains relatively weak, despite having a significant correction since 2021.

Higher rents needed for new builds to stack up

Reducing yields largely offset the impact of higher construction costs during 2020-2021. Softer yields and persistently high construction costs mean higher rents are needed for new developments to be feasible. Some experts perceive construction costs are now showing signs of softening which may help improve the viability of new developments.

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