The Auckland Growth Story Continues
Total Property - Issue 4 2016
Our biggest city is experiencing unprecedented levels of commercial and residential development activity. That brings with it considerable challenges particularly around infrastructure and construction capacity constraints, but it also presents big opportunities for property investors to cash in on.
An increasing number of commercial property investors are asking us where the next big opportunities are - given that the current cycle of cap rate compression looks to have pretty much run its course. Inflationary growth – traditionally another significant contributor to property capital growth – is also almost non-existent and likely to remain at very low levels for the next few years at least.
In this environment, the best prospects for capital appreciation are most likely determined by locational factors – picking specific geographical areas with strong growth prospects – along with asset diversification beyond office, retail and industrial properties to include other sectors currently on a growth trajectory. These include sectors like aged care/retirement, private education, hospitality, tourism and leisure, and healthcare for both people and their pets.
Large cities with rapidly expanding populations offer the best opportunities and Auckland is one of the world’s most active big cities with the RBL Crane index recording a 42 percent increase in Auckland crane numbers since late last year.
And we’ve really only just begun. According to the National Construction Pipeline report, the value of all construction in Auckland is forecast to peak at $16.3 billion in 2018 - a 73 percent increase from 2013.
In central Auckland a number of massive projects are underway including the convention centre and hotel, Precinct’s Commercial Bay, the ongoing development of Wynyard Quarter, City Rail Link and a bunch of high rise residential buildings. While this brings disruption for commuters, its case of short-term pain for long-term gain as Auckland’s aspiration to be a world-class city must include a thriving CBD which makes the most of its magnificent harbour location.
There’s plenty happening outside the CBD too - including an increasing trend towards large-scale Mixed Use developments in locations like Westgate and Alexandra Park; final stage construction on the Western Ring Route and cranking up residential development to house Auckland’s expanding population.
That population will be an increasingly multicultural with its own particular property preferences. Examples of this already include the transformation of central Dominion Road into a mini Chinatown – along with a strong Indian flavour at its southern end - and the emergence of Chinese supermarket chains like Tai Ping. One of our agents is also assisting a client to open an aged care facility for elderly Chinese.
The rest of New Zealand is humming along nicely too – as reflected in the great success of Bayleys’ Regional Commercial Property Expo held in Auckland. Bayleys’ commercial and industrial specialists from around the country delivered regional presentations; promoted properties featured in our portfolios; and provided information on opportunities in their markets.
We are very fortunate to be living in a relatively safe and economically stable country which continues to provide a good environment for investment in commercial and industrial property.
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