November 2022 – The continued strength of New Zealand’s industrial property sector is reflected in JLL’s latest quarterly market
snapshots, released today. Design and build industrial spaces in Manukau and availability of greenfield spaces at
attractive prices in Christchurch in particular, continue to be in high demand.
This has seen average rents for prime industrial space lift by 5.8% in South Auckland and 3.8% in Christchurch over the
last quarter. There is also plenty of development in the pipeline, with Auckland looking at 630,000 sqm of new
industrial space in the next two years and Christchurch an additional 85,000 sqm. Over 75% of this is scheduled for
2023.
According to JLL’s Head of Research Gavin Read, low vacancy and strong yields signal growing confidence in the
industrial market, but many are looking at how to mitigate rising construction costs.
“Despite a significant number of developments in the pipeline, cost of construction does remain a concern for developers
and owners as they consider design options for new builds and redevelopments.”
Across the office sector, average rents have seen either moderate growth or have stabilised in the last quarter. Strong
demand continues in the prime end of the market, especially in Auckland’s CBD as Read says tenants are continuing to
seek premium spaces with quality end-of-trip amenities. Prime office rents in Auckland’s CBD now average $543 per sqm,
up 4.23% compared to the first quarter of the year.
“The demand from occupiers seeking quality spaces for their staff continues to widen the divergence between prime and
secondary asset rents and vacancy rates and this is likely to carry into 2023.”
Read says tough market conditions with rising inflation and interest rates are negatively affecting business confidence
and are likely to have an impact on the commercial property sector over the coming months. Another rising influence he
points to is an increasing requirement for occupiers to meet environmental, social and governance goals in the coming
years as well.
“While there are no regulatory requirements for Green Star and NABERS ratings for commercial real estate currently,
observing offshore trends in Australia, the UK, and Europe points to New Zealand adopting its own regulatory framework
sometime in the near future.”
Retail vacancy within New Zealand’s main centres also remains challenging with average foot traffic still struggling to
return to pre-pandemic levels. Read says interest from major international brands such as Ikea seeking to establish
premises in New Zealand as well as the return of cruise ships will be positive for retail in our CBDs as we head into
2023.
“The outlook on retail spending is still likely to be positive as we head into 2023 as high employment remains, but we
may see a tightening of spend over the coming months as Kiwis navigate the next few months of rising inflation and
interest rates.”
Highlights from the latest snapshots (attached) include:
OfficePrime rents in Auckland’s CBD continue to increase while secondary rents remain unchangedSeveral high-profile development projects are likely to be completed in 2023 within the CBD, including Precinct
Properties’ 1 Queen Street and The Wynard Quarter Innovation Precinct across three buildings.Premium office space will continue to drive rental growth coupled with record low vacancies in the capital.Due to limited stock availability, prime CBD office rent in Christchurch is expected to increase by 5.3% to $380 per sqm
by the end of the year.
Industrial630,000 sqm of industrial space is due for completion in the next two yearsCountdown’s $99million, 11,000sqm distribution centre is due for completion in 2024
RetailOverseas interest in retail remains high, indicated by the recent sale of 18 Gull service stations in Auckland and
Wellington to ASX-listed REIT Charter Hall Retail for $64.5millionManawa Bay, the Auckland Airport premium shopping destination, is due to be completed in 2024 and will feature 100+
stores over 24,000sqm and 1,400 carparks