Market Motors on
Total Property Issue 5 2016
There are no signs of any easing in the commercial and industrial property market’s considerable momentum, says John Church, Bayleys’ national director commercial.
The high levels of commercial property activity seen at the start of this year are carrying through into winter months.
A good indication of market performance can be found in Bayleys’ turnover figures for the April-June quarter. Total national sales and leasing commission revenue for the commercial sector of our business was up 25 per cent on the same quarter last year.
That’s a remarkable increase given that 2015 was the market’s hottest year since the global financial crisis.
Most pleasing is that this growth is relatively evenly spread around the country confirming our market commentary that regional economies are performing very well indeed - despite a dairy downturn.
Two of our biggest recent sales came from the provinces. The former CPO building in New Plymouth, now anchored by a Quest Apartment Hotel, and a giant Hastings bulk retail store tenanted by The Warehouse both sold in the double figure millions, representing very significant transactions for these markets.
This indicates just how much the market has moved over the past five years. It also shows regional markets are now exhibiting, to varying degrees, a firming yield trend that has been evident in Auckland for some time.
Another feature of these transactions was the strong interest in these two properties from Auckland investors. This increasingly familiar pattern prompted the holding of our regional commercial property expo in our central Auckland office which showcased regional listings from our third Total Property portfolio. As a result of its success, we are gauging vendor interest in holding a second, similar regional expo in early November.
Where to from here? Nothing is on the immediate horizon that looks likely to slow the market. The Reserve Bank is expected to make at least one more cut to the Official Cash Rate this year - putting even more downward pressure on already heavily squeezed cap rates. And some economists are predicting the current low inflation/low interest rate environment will remain in place for the next five years.
Another key influencer on property values – the supply/demand balance – remains heavily weighted on the demand side where there is now a very strong owner-occupier component.
Indications are the important supply side of the equation may start to ramp up a notch or two, with more marketing campaigns on the horizon later this year.
It remains to be seen if this trend results in a significant supply increase and if, in combination with a growing new building development pipeline, it has much impact on values and clearance rates.
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