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More people, more square metres

As the movement of people around the world continues to play catchup after border closures and extended periods of uncertainty, latest figures show New Zealand’s annual net migration gain is on the march.

Net migration is the difference between the number of migrants arriving minus the number of residents departing in any given year.

For the 12 months ending November 2023, New Zealand’s net migration gain was close to 128,000. This is more than double 2017 levels, one of the highest gains recorded in more than 20 years and higher per capita than that of Australia.

Late last year, Prime Minister Christopher Luxon said annual migration gain at this level is unsustainable, and infrastructure needs to be better managed to support growth. Tightening of immigration policy settings looks inevitable, while many commentators are saying we need a more nimble system that considers the real needs of businesses and communities at any given time rather than being just a numbers game.

Bayleys business line leaders said we can expect to see some change in the industrial, retail and office sectors if migration gains continue on the current trajectory. National director industrial Scott Campbell said while open borders have helped staffing shortages in the industrial sector, warehouse supply will come under more pressure as more people means more industrial footprint will be required.

“There’s still robust occupier demand for logistics, distribution and general warehousing stock with vacancy levels remaining low and rents tracking upwards in recent years. “Construction costs are yet to come back into line for developers so while we wait, there will be real pinch points on the supply side because with a growing population, New Zealand, and in particular Auckland, needs more industrial capacity.”

Campbell said estimates suggest we need 600,000-700,000sqm of new space per year if migration carries on its current path.

“Our suggestion is that occupiers engage with Bayleys early if they are considering a move to tap into our industry intel and contacts because the squeeze on space doesn’t look likely to ease anytime soon.”

In the retail sector, we’re are paying more for goods and services given inflationary forces but with more immigration, we’ll have more people buying stuff – so do we have enough retail space?

Bayleys national director retail Chris Beasleigh said while increased net migration has been good news for businesses faced with staffing shortages, if New Zealand’s retail footprint is to expand, construction costs and interest rates will need to level out and consumer confidence rebound.

“Consumer spending is down so for now, things are muted for retailers.

“Businesses that nail the tightrope walk between physical retail and e-commerce, and that are prepared to adapt and pivot when the market demands it, and have strong buying power are doing OK.

“There’s always churn in the retail environment, but businesses that don’t evolve to new ways of retail are being left behind – regardless of their size, location or type of business.” Bayleys national director commercial leasing Matt Lamb said while the recent uptick in net migration numbers hasn’t influenced demand for office space around New Zealand yet, that is likely change.

“The net migration gain is sure to escalate demand for office space, with one specific sector – tertiary education and language schools – expected to grow.”

"We continue to observe businesses adjusting their office requirements to align with evolving work practices, resulting in existing pressure on prime office space. However, the influx of migrants could play a role in stimulating the secondary office market.

“Population growth may encourage owners of older buildings within the secondary office market to reposition themselves in the office sector to get a better bite of the growing leasing pie.”

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