Prime rents still growing, albeit at a slower rate

• Prime (premium and Grade A) rents are still growing, albeit at a slower rate. This is mainly due to an increase in vacancies in lower floors at the lower end of Grade A properties.
• Average net premium rents increased by 0.7% in Q3 with upper-end premium rents at NZD 850 per sqm per annum (+NZD 10 per sqm q-o-q) and lower-end rents at NZD 560 per sqm per annum (unchanged q-o-q). Average Grade A rents remained unchanged at NZD 505 per sqm per annum.

One NZ to move back to the CBD

• A major pre-commitment has been secured for Mansons TCLM’s 30 Daldy Street. One NZ will return to the CBD after moving from the CBD to the North Shore seven years ago. One NZ has committed to three floors.
• BNZ signage is up at 80 Queen Street. BNZ celebrated the completion of Stage 1 of their relocation and consolidation project, including a new flagship branch. Vacancy will increase upon BNZ’s departure at 30 Mahuhu Crescent, with the space yet to be backfilled.

Yields remain flat but new tightening cycle expected

• Yields remained flat across all grades and precincts throughout 2024, but a 25-bps cut in the OCR in Q3 is the start of a new tightening cycle. While evidence remains limited, Prime yields are projected to decrease by 12.5 bps by December 2024.
• A significant transaction was the sale of 63 Albert Street, a 12-storey 5,378 sqm property for NZD 21.35 million.

Outlook: Workplace optimisation, sustainability and lower interest rates to influence activity

• The bifurcation in Prime and Secondary sector performance will continue, driven by flight to quality and location, the ongoing evolution of hybrid working models and a greater focus on sustainability in occupier decision-making.
• The reduction in the OCR is the catalyst for more business and investment activity. We expect to see an increase in office leasing and sales evidence in Q4 2024 and 2025. Further market momentum is expected, in line with the projected decrease in OCR and interest rates.