Availability rises as occupiers optimise occupancies

• The overall vacancy rate rose to 17.2% in H2 2025, up from 15.0% in H1 2025, an increase of 220 bps. Prime vacancy reached 8.5%, rising 130 bps from H1 2025, while secondary vacancy climbed 270 bps to 19.8% over the same period.
• Reduced demand for government office space, coupled with the completion of several refurbishment projects, is expected to push vacancy rates higher across all grades, with an overall vacancy rate forecast to reach around 20.0% by 2028.

Office pipeline grows, but pre-leasing remains low

• Precinct Properties recently completed an 11-storey office building at 55-61 Molesworth Street in Wellington’s parliamentary district. The New Zealand Ministry of Foreign Affairs and Trade (MFAT) is set to be the anchor tenant.
• One of the notable buildings expected to undergo refurbishment in 2026 is HSBC Tower, MFAT’s previous home, a 26-storey 15,000 sqm office building located at 195 Lambton Quay.

Rents hold steady overall, with increasing focus on rising OPEX

• Prime average gross rents remained unchanged this quarter at NZD 756 per sqm p.a., while secondary average gross rents also held steady at NZD 450 per sqm p.a. in the quarter.
• Prime average gross rents are expected to increase to NZD 759 per sqm p.a. by year-end, representing an increase of approximately 0.4%, driven predominantly by operating expense increases.

Outlook: Yields hold firm as market demonstrates adaptability

• Office vacancy rates have climbed to 17.2% in H2 2025 from 8.8% the previous year. This increase is primarily due to new supply and ongoing efforts by government and private sector tenants to optimise their office space commitments.
• There is a heightened focus on controlling operating expenses, particularly as insurance premiums and local council rates have risen in recent years. As a result, landlords are increasingly shifting toward net lease structures rather than gross leases wherever possible.