Office leasing activity ramps up as tenants consider options

Leasing activity in the Christchurch office market is stepping up a notch this year, as occupiers weigh up their options with more new space due to enter the market. 

However, with availability of prime space still limited, many tenants will either need to sit tight until the next wave of supply hits the market in 2026 and 2027, or consider the secondary options available now.

Mitchell Wallace, Associate Director of Office Leasing at CBRE, said the extremely low vacancy in CBD offices over the past few years caused a number of office occupiers to stay put in their existing premises or defer their decision making.

Lease expiries are now looming for many of those tenants, resulting in elevated levels of market activity this year. 

“Over the past two years we’ve been cautioning occupiers against delaying decision making with regard to their office premises, as supply was constrained and demand was increasing. Last year saw an already tight market reach a point of maximum contraction, which meant those that did defer their decision making looked around for options and found nothing available that suited them,” he said.

“Now, with the pressure on from both lease expiry and spatial constraint perspectives, we’re seeing significantly higher activity and occupiers putting greater focus and energy into leasing decisions.

“The availability of CBD space is still restricted however, so there’s a refreshed willingness among tenants to consider options they may have dismissed last year. If they are able to wait, tenants are also opting to look at the new office space that is due to enter the market in 2026 and 2027.”

The Christchurch office leasing market has remained very strong relative to other main centres in New Zealand. Christchurch office workers are also spending more time in the office than their counterparts in Auckland and Wellington, according to CBRE’s latest New Zealand Office Occupier Sentiment Survey.

This backs up anecdotal evidence that Christchurch office-based employees like working in the CBD, with its new, high quality offices, excellent amenities and comparatively easy commuting.

A net 15% of Christchurch occupiers are expecting to increase their office footprint over the next two to three years, indicating a positive outlook for the office market, the survey showed.

This trend is giving more developers the confidence to progress with uncommitted building and refurbishment projects. The latest wave of CBD office supply began to enter the market last year, after five years of very little construction and refurbishment activity.

Among the projects planned for completion in 2026 is a new building at 107 Cambridge Terrace, which will add approximately 5,500sqm of office space to the market, along with the long-awaited refurbishment of the former State Insurance Building at 116 Worcester Street. 

Latest research from CBRE shows a jump in the CBD office vacancy rate to 8.4% as at December 2024, up from 3.7% in the September 2024 quarter, said Jorge Chang Urrea, Research Manager at CBRE.

“The increase in vacant space is almost entirely attributable to the completion of the ex-IRD building refurbishment on Cashel Street, adding 14,000sqm of office space to the market.”

This means the difficulty in securing readily available office space across the rest of the CBD hasn’t materially changed for most occupiers, said Wallace.

In the Christchurch suburban office market, vacancy is higher, rising from 7.1% to 9.0% during the second half of 2024. 

Given the amount of vacant space in the suburbs, landlords are facing competition to secure tenants. In this environment, professional and knowledgeable landlords have a distinct advantage, Wallace said. 

“Tenants want to build a positive partnership with an experienced landlord, who understands their business and is prepared to work together to understand evolving needs and how this influences their property decision making.”

Those owners who recognise current market movements and rental trends, analysing data and seeking guidance from a variety of reputable sources, will be in the best position to secure quality, long term tenants. 

Engaging appropriate consultants will also give private landlords an advantage when competing against larger portfolio or institutional property owners, he said.

“Private owners of multi-tenanted buildings can benefit greatly from engaging professional property and facilities managers to oversee lease management, budgets, outgoings and building maintenance plans. High quality and well educated tenants have a strong preference for working with equally knowledgeable and professional landlords - ultimately it’s a partnership and those landlords who recognise this will be better placed in the current market.”