Vacancy expected to increase as refurbishment projects complete

• The overall vacancy rate increased 30 bps to 8.0% from 7.7% in H2 2024. This comprises a prime vacancy rate of 5.0%, up 10 bps compared to Q2 2024, and a secondary vacancy rate of 9.5%, up 30 bps compared to Q2 2024.
• The Wellington office market saw approximately 16,000 sqm of sublease space being introduced during the last few months from the public sector, along with circa 13,000 sqm from the private sector.

Significant increase in supply expected over the next two years

• Precinct Properties is developing an 11-storey office building at 61 Molesworth Street in Wellington’s parliamentary area, and it is currently expected to finish in late 2025. The New Zealand Ministry of Foreign Affairs and Trade will be the anchor tenant here.
• A number of prime and secondary buildings are under refurbishment/seismic strengthening and are expected to be completed by 2027. These include 80 The Terrace, 96 The Terrace, 33 Customhouse Quay, 50 Victoria Street, 68-86 Jervois Quay and 13-27 Manners Street.

Stability in rents as occupier options rise

• Although prime average gross face rents increased by 0.7% quarter-on-quarter, prime average net face rents remained unchanged at NZD 434 per sqm, p.a., since Q4 2024, with OPEX increasing by NZD 5 per sqm, p.a., during the quarter.
• Prime and secondary CBD average gross face rents stand at NZD 751 and 455 per sqm, p.a., respectively. Average gross face rents for Thorndon and Te Aro stand at NZD 460 and 360 per sqm, p.a., respectively.

Outlook: Government expenditure to impact the capital’s office market

• Wellington continues to navigate fiscal adjustments under the coalition government’s conservative expenditure strategy, which is impacting office space dynamics, particularly in the CBD.
• The potential release of additional government-occupied space, along with private sector leases, could alter leasing dynamics, spurring strategic space consolidation strategies over the coming quarters.