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Colliers International has just released their latest New Zealand CBD Office Market Indicators report.

Any organisation with an office lease expiry in the next five years would be well advised to consider a couple of key indicators in this report. Firstly, incentives are increasing, steadily in Auckland, and more slowly in Wellington. Christchurch’s lack of activity makes it hard to calculate what incentives are doing in that market. With vacancy likely to peak in both major centres around 2013, any major tenants looking to move in the next five years should make a start on their analysis and search process next year at the latest. Our Auckland data suggest an incentive equivalent to at least 10%, the equivalent of five weeks rent free per year of the lease is normally available even in the best buildings, to persuade tenants to move in. The ‘front loaded’ nature of the incentive makes it more valuable to a tenant than that, thanks to the time value of money.

We should emphasise that these are market guides and are not universally consistent. Some properties seem to keep attracting tenants relative easily without having to offer incentives on this scale. Wellington’s market is behind Auckland mainly due to the protective effects of government expansion until recently, and the later completion of their crop of new CBD buildings compared to Auckland. However incentives and vacancy will increase in the capital in the next year.

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