The most recent research report from Colliers on trans-Tasman office and industrial market trends highlights that New Zealand is leading the way in the office sector.
Among the major cities, Wellington boasts the region’s strongest-performing office market, with a prime grade vacancy rate of only 1.3 per cent and overall vacancy rate of 5.4 per cent.
Only three centres in Australasia have an overall vacancy rate under 10 per cent.
Canberra comes in behind Wellington with a national low of 8.7 per cent and as the rebuild continues Christchurch’s resurgent CBD office market rounds out the list with a rate of 9.7 per cent.
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Prime grade office vacancy rates sit below overall rates across all major centres except Brisbane, with Auckland’s prime grade vacancy of 8.2 per cent lower than all centres other than Wellington and Sydney.
Ian Little, Associate Director of Research at Colliers, says the latest survey results show Wellington’s strong performance is underpinned by government occupation, and a demand for higher quality office space from the corporate sector.
“The flight to quality trend has intensified over recent years as the benefits provided by modern, flexible, high-specification premises have become increasingly clear. Prime grade premises better enable companies to meet ever more complex ESG requirements and assist them in attracting employees back to the workplace,” Little says.
“While the gap between prime and overall vacancy rates is not as wide within Sydney and Melbourne, this is largely because prime grade spaces comprise a larger proportion of the total stock than is the case in Auckland and Wellington. In Melbourne, premium and A-grade premises comprise just over 70 per cent of the total, in Sydney the figure is 63 per cent.
“By contrast, despite recent additions to supply, offices classified as prime in Auckland comprise just under 50 per cent of the total stock, and in Wellington the figure is lower still at just under 25 per cent. The combination of tight market conditions and a low ratio of prime grade space signals a requirement for ongoing development in Wellington to fully unlock its potential.”
The most recent Wellington CBD office market report from Colliers reflects the capital’s strong performance, despite the prospects of an economic slowdown and the sharp downturn in business confidence, with high demand for office space outpacing new supply.
The completion of several significant projects this year will bolster office supply, and while development activity is set to slow after 2023, ongoing demand from both tenants and investors continues to underpin interest in prime quality developments.
While New Zealand is leading the way in the office sector and overall industrial vacancy rates are close to record lows, conditions across the major Australian centres are tighter still.
Data from the Property Council of Australia shows that Sydney boasts the lowest industrial vacancy rate at 0.2 per cent. Likewise, Melbourne, Perth, and Brisbane all boast vacancy rates of less than 1 per cent. In Wellington, the rate is 1.3 per cent, and in Auckland, the vacancy rate is 1.8 per cent.
“An increase in development activity is evident across most centres, signalling an easing of conditions, which will be welcomed by the tenancy sector,” Little says.
In 2022, Auckland industrial building consent issuance reached record levels, with just under 500,000sq m of new workspace consented. In Wellington, development intentions remained strong with 46,360sq m of space consented, representing the third-highest total approved since 2010.
- Article supplied by Colliers
