The Colliers Research team have released their latest findings on the Australasian office and industrial markets, revealing a landscape shaped by economic shifts and evolving occupier preferences.
The report indicates that market trends remain broadly aligned across the major Australasian office and industrial markets.
Vacancy rates across industrial markets, while still low, have risen for the first time in a number of years.
The office market sees ongoing demand divergence between prime and secondary spaces.
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Ian Little, Associate Director of Research at Colliers, says these trends reflect the broader economic conditions and a shift in how businesses approach property leasing.
“Rising interest rates in Australia and New Zealand, aimed at curbing inflation, have led to a slowdown in economic activity and an uptick in unemployment,” Little says.
“The economic backdrop has adversely impacted both business and consumer confidence. There is however, growing confidence on both sides of the Tasman that interest rates have peaked, with potential easing on the horizon for late 2024 or early 2025.”
Vacancy rates within the industrial sector, which have been driven to record lows in recent years, are easing across all major centres.
“The easing of conditions reflects a more moderate leasing environment driven by companies right-sizing their property footprint following the normalisation of supply chains and softer demand from the retail trade sector,” Little says.
Auckland’s industrial vacancy rates remain stable, but an increase in sublease options signals similar shifts within the logistics sector. Despite the easing of conditions, vacancy rates remain below 3 per cent across all major centres, with vacancy in Wellington standing at 1.2 per cent as of November 2023.
Upward pressure on rentals is easing across most centres, a trend which will be welcomed by tenants following the record levels of growth seen since 2021.
Across the Australian centres, quarterly rental growth is now more aligned with historical averages, with the national average prime net face rent increasing by 1.5 per cent over Q1 2024.
Rental growth remained apparent in Wellington, with average prime grade warehouse face rents up by 3.5 per cent. In Auckland, which has seen strong growth during the past three years, rents have stabilised.
Within the office sector, tenant preferences for high grade, environmentally sustainable buildings has remained apparent over the past 12 months. Prime grade vacancy rates are lower than those seen in the secondary sector in all centres, with the exception of Adelaide and Sydney due to recent additions to supply.
The survey results show the major New Zealand markets being the strongest performers. Auckland holds second place with a prime grade vacancy rate of 6.8 per cent. Wellington continues to lead the way with prime grade vacancy standing at just 2 per cent.
“The preference for sustainable properties is a clear trend, underscoring the importance of environmental considerations in tenant decisions,” Little says.
Looking ahead, Colliers Research anticipates the Australasian markets will continue to adapt to economic changes and tenant preferences. The focus on sustainability and the right-sizing of property footprints are expected to remain key factors in the evolving landscape.
- Supplied by Colliers
