NZ Commercial Outlook

I am quietly confident that New Zealand’s commercial property market will continue to show positive signs of improvement over the coming year.

With our major trading partners still showing respectable growth, population pressure in Auckland, the Christchurch rebuild and no significant 80’s style overhang, New Zealand is relatively well positioned as we move into 2012.

As with the last 12 months privates will continue to dominate the investment landscape with fund managers un-likely to re-weight into property in the near future. We do however expect to see re-weighting within existing listed portfolios, but not a broad based return of the LPT’s as buyers.

We also expect continued interest from offshore investors who view NZ as a global safe haven away from the turbulence of Europe and America.

On the development front, we are seeing large scale opportunities like SOHO Square and Victoria Quarter re-priced and presented to the market, as prime lenders draw lines in the sand and crystallise their positions.

The current low interest rate regime coupled by the emergence of under the radar underwriters is beginning to breathe new life into the development landscape.

We are already fielding enquiry from South Island investors capitalising on Christchurch earthquake insurance payouts looking to diversify their geographic base.

Hotels are another active sector with over $1billion in hotel assets changing hands in Australia and New Zealand over the past 24 months. A trend that is likely to continue into 2012 as investors take advantage of counter cyclical conditions.  

The Auckland CBD office market led a staged recovery in the second half of 2011 with “smart money” taking advantage of pricing and future growth opportunities, supported by the lack of planned CBD office development.

Oversupply of secondary retail in Auckland’s CBD is likely to lead to an easing of rates and vacancies in this sector over 2012-13. This will become more apparent over the next 12-18 months with 200 plus retail strata units coming on stream.

On the industrial front high net worth privates, charitable trusts and superannuation funds will continue to seek out large modern industrial warehouses, putting additional downward pressure on yields in prime industrial suburbs.