Premium vacancy still under 2%, but overall Prime vacancy increases

• Vacancy for both Prime and Secondary offices increased in H1 2024, with Prime up by 210 bps to 9.7% and Secondary up by 40 bps to 20.1%.
• The increase in Prime vacancy primarily comes from Grade A properties, which have an additional 15,700 sqm of vacant space compared with H2 2023.

Most Prime supply under construction is pre-committed

• Many of the new prime office developments to be completed during the next two years have been pre-committed. Spark has pre-leased 50 Albert Street (Fifty Albert), Milford Asset Management and MYOB. The anchor tenant at 30 Daldy Street is One NZ.
• One NZ will be moving back from the North Shore to the CBD after seven years. This development is expected to have two towers, of which One NZ has committed to three floors in each tower.

Prime rents increase marginally, up by 1.3% q-o-q, while secondary rents remain unchanged

• After a marginal softening by 6 bps to reach 5.94% for the Prime CBD average net yields in December 2023, yields have remained unchanged across all grades and precincts throughout the first half of 2024.

Outlook: The divergence in rents and vacancies for Prime and Secondary properties continues

• Prime rents are still growing, albeit at a slower rate, mainly due to an increase in vacancies at the lower end of Grade A properties. They increased by 1.3% in the quarter and now stand at NZD 603 per sqm per annum.
• Rents across all other grades and precincts remained unchanged for the second consecutive quarter. Average net Secondary CBD rents stand at NZD 283 per sqm per annum, with these not forecast to increase until the second half of 2025.