Taking the pulse of the market

Taking the pulse of the market

Total Property - Issue 4 2018

Bayleys Research conducts a quarterly commercial and industrial sentiment survey and the results are in for 1Q 2018.

Bayleys Research manager Ian Little says the survey results, constructed from 5,700 responses from tenants and owners across the country, give valuable insights into the market.

“Half of our survey respondents cited ‘the government’ as their biggest concern in the commercial and industrial arena at the moment,” explains Little.

“When prompted to expand on this, there were some common themes.

“Respondents expressed the views that wealth creation was not a priority, that policies were still unclear, and that there needs to be clear decision-making around infrastructure and future proofing New Zealand’s transport network.

“There was also a call for more government investment in the regions and a need to implement processes that would raise productivity.”

The survey revealed that only one in five survey respondents ranks economic growth as a concern, followed by interest rates and finding commercial and industrial stock to buy.

The regions are tipped for further growth according to survey participants.

“Tenant respondents expect the regions to experience higher levels of commercial and industrial rental growth than the main centres,” he says.

“While just over half of the survey respondents expect rents to rise nationally in the next year, the majority of this is driven from Queenstown, Tauranga and Hamilton – rather than Auckland.”

Meanwhile, the survey indicated that the number of respondents expecting rent rises of more than 5% over the next year has slowed, but only 10% of respondents nationally expect rents to fall.

Industrial remains the sector with the strongest expectation of rent rises nationally, albeit rents are at a lower base than other sectors.

“Low vacancy rates across the commercial and industrial property spectrum and ongoing demand pressures are expected to keep upward pressure on rents in the foreseeable future,” says Little.

“The market where tenants most expect rents to rise is Queenstown, with almost four out of five survey respondents predicting rental increases over the next 12 months in this southern hotspot.”

Expectations of rental increases in Wellington’s office market have risen strongly since the last Bayleys’ survey and now match predictions for the industrial sector, with almost two-thirds of all respondents expecting higher rents next year.

Little says on the retail front, Tauranga emerged as a standout with a whopping 15 percentage point increase on rents and values from the 4Q 2017 sentiment survey.

More than half of the commercial property owners surveyed expect values nationally to increase over the next year, with just 10% of respondents nationally expecting values to fall.

“Owners in Queenstown remain the most bullish about value growth over the next 12 months across the industrial, office and retail sectors,” says Little.

“More owners than not in Auckland expect value growth over the next 12 months, however, owners in Queenstown, Tauranga, Wellington and Hamilton have even higher expectations which moved Auckland down to 5th spot in this survey compared to 3rd spot in 4Q 2017.”

The industrial sector’s golden run in recent years – where it has outpaced the other sectors on most benchmarks – seems to still have some mileage in it according to owners with two-thirds of all survey respondents expect the industrial sector to show further value growth over the next 12 months.

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