Office market strategies changing

JUne - JULy 2022 Office market strategies changing

JLL research shows increasingly positive sentiment across the Auckland, Wellington and Christchurch office markets following the disruption caused by Omicron

City overview

Auckland

Prime buildings continue to perform well with a growing divergence between rents for prime and secondary buildings in the City of Sails, particularly pronounced with buildings that have established occupierowner relationships. Our figures reflect this, with vacancy unevenly spread across the CBD on a building-bybuilding basis.

Wellington

The Capital’s office market has stock currently under construction that is set to be completed in 2H22 or 1H23. With much of this stock being A-grade space and preleased, the trickle-down effect in lower grades is expected to be significant.

Christchurch

Continuing the trend from late 2021, the office market in the Garden City remains stable with increased investor interest in this region supported by the limited stock that is available for purchase in Auckland and Wellington.

Wellington

The great return to the office that was expected for early 2022 was muted when New Zealand moved into the red traffic light setting in response to the Omicron outbreak in late January. 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.

Access the full Vertical Vacancy Review 1H 2022 here

Christchurch

Gavin Read is the Head of Research at Jones Lang LaSalle (JLL) New Zealand.

JLL is a leading professional services firm that specialises in real estate and investment management.