Emerging optimism in New Zealand’s commercial leasing market

Fabio Pagano, General Manager – Property, on leasing highlights, shifting dynamics, and market opportunities heading into 2025.

New Zealand’s commercial leasing market remains subdued, with tenants carefully weighing up their next steps and many opting to stay put – for now. This is typical of property’s ‘late-cycle’ nature, where vacancy rates and rents typically take time to stabilise post-recession.

However, green shoots are emerging. Across most asset classes, we see early signs of recovery, with gradual improvement anticipated in 2025 as economic conditions strengthen, tenant sentiment rebounds, and decision-making agility returns.

Market highlight: 33 Corinthian Drive

The new ASB lease at 33 Corinthian Drive is a standout achievement for Oyster in 2024 and the largest deal by net lettable area in New Zealand to date.

ASB has committed to a 9-year lease term, securing an additional six years of tenure and demonstrating their long-term commitment to this location.

The new lease – achieved in a challenging market – is a positive outcome for investors, delivering a significant increase in rental income. Together with the extended lease term and planned capital improvements, it will also support an uplift in the property’s overall valuation.

Find out more about the new ASB lease at 33 Corinthian Driver HERE

Sector snapshots

Office: Tenants are prioritising sustainability and high-quality, well-located offices. Government agencies are reassessing space needs for 2025 amid reduced work-from-home trends. JLL reports[1] mixed performance, with Wellington facing rising vacancies despite steady demand for premium, sustainable spaces, while Auckland sees a “flight to quality” alongside growing price sensitivity.

Industrial: The industrial market remains strong, with positive rental growth and declining vacancy rates. JLL expects transaction volumes to rise through 2025, driven by demand for modern, large-scale facilities and improving economic conditions.

Retail: The retail sector is adapting and recovering. JLL reports that as job stability improves and interest rates ease, leasing activity is set to gain momentum in 2025.

Looking ahead to 2025 – our focus on sustainability and innovation

Our property team continue to strengthen our alignment with these market trends through ongoing asset enhancement and progressing our sustainability roadmap via NABERSNZ ratings and leveraging technology to enhance performance.

Strong tenant relationships and implementing value-add strategies remain core to our approach as we seek to maximise growth in the next phase of the economic and property cycle.

The information in this article is current as of November 2024

[1] JLL New Zealand Market Dynamics – Q3 2024