When English punk rock band The Clash sang “should I stay, or should I go?” they weren’t talking about office workplaces – but it’s a valid question.

On the one hand, business sentiment remains muted and, while improving, the economic outlook is still gnarly. For some office occupiers, rolling over an existing lease is an easier option than searching for new premises and then executing a move.

On the other hand, there is unprecedented opportunity in the current market with a high inventory of sublease space available and landlords looking to do deals.

Quality office space with a high-level of amenities in modern, well-located buildings is easier to find now and there are footprints to suit all business operations from full floors to compact turn-key options.

Bayleys national director office, Matt Lamb, says there’s a definite two-tiered market in Auckland, with varied rental positions based on a building’s quality and location, and some core fundamentals are changing.

“Due to the low vacancy rate across premium buildings, rents were increasing for A-Grade stock over the past 12-plus months, however, this trend has started to soften in the last quarter.

“Meanwhile, landlords with secondary-grade stock are having to be more aggressive by increasing incentives to entice tenants – typically via rent-free periods or contributing CapEx towards fit-out.”

Lamb says the influx of sublease stock is shaking up the market, with many listings offered at significantly reduced rental rates as head tenants who are part-way through their lease look to offset surplus space liabilities.

“The competition is intense in Auckland, and it's not uncommon to see rents reduced by 50-percent of market value for well-presented, fully-fitted spaces so for businesses looking for short lease terms, it’s a ripe market.

“This does create some challenges for stock with direct leases, however, the direct leasing market continues to attract occupiers looking for long-term leases and the opportunity to personalise the space for their operational needs.”

While certain sectors like IT and some government-aligned agencies have been downsizing, Lamb is noting an increase in enquiry from education providers and the private healthcare sector for office space in pivotal locations.

“And with Auckland’s City Rail Link project inching closer to completion, we’d expect competition to emerge in areas that have been in flux for some time.”

Bayleys Wellington office leasing specialist, Luke Frecklington, says the inventory of vacant office space is increasing in the capital, with The Terrace and Te Aro precincts having particularly high vacancy.

“If occupiers are coming up to a lease breakpoint or review, they’ll find a multitude of options on offer.”

With the downsizing of the public sector, Frecklington expects that towards the end of this year and into early-2025, significant amounts of sublease space will come to the market providing an opportunity for tenants to secure well-located, good-quality premises – often with decent existing fit-out.

“In properties that have been returned to base-build, and where landlords haven’t got genuine capital to offer fit-out contribution, rent-free periods are common now in the capital.

“Typical lease lengths have also come back a bit showing that landlords are wanting to engage with tenants to find workable solutions.”

Jesse Paenga, Bayleys director of South Island capital markets and corporate leasing, says there’s virtually nil vacancy in the Christchurch A-Grade office market, but good opportunity and choice across B-grade space.

“For example, there are large floor plates across multiple levels for lease in the former-IRD building in Cashel Street which has been strengthened and refurbished, and space is coming onstream in the NZR Co. Building in Hereford Street.

“Deals are being done and there’s been a bit of movement around the city as businesses reposition and right-size their real estate footprints.”

With very little in the new office building pipeline, Paenga expects the A-Grade market to remain fairly tight and for rents to hold firm for quality space.

“Office rents have stabilised at a new high for the city with the leases recently struck at the Regent Building helping to push average rents up.

“Future high-spec’ A-Grade development would likely reset rents again across the market.” Should you stay or should you go? Let Bayleys highly-connected office leasing team fill you in on the opportunities available on – and off – market, around the country.