2012 Year to June

Posted on Thursday, June 28 2012

As we approach the mid-point of 2012, it is timely to reflect upon what has happened over the first half of the year and what the balance of the year possibly holds in store.
While there unquestionably has been some balance restored to the commercial property sector, it is still a brittle landscape out there.

Yes, we have seen some confidence come back into the market particularly in Auckland, where investors are once again showing interest in the sector with some large deals occurring and, equally, good activity at the lower value end of the spectrum. Examples include the sale of BECA House at 21 Pitt Street, Auckland for $55m to a Christchurch investor whilst a collection of small retail units in the Merton East Convenience Centre situated on a high profile intersection at the gateway to Auckland University’s Tamaki Campus in St. Johns, Auckland, sold under the hammer at a Bayleys auction for what can only be described as “top prices” for the vendors.

On the other hand, businesses continue to be cautious about the economic outlook and this caution remains a handbrake on the commercial property sector. Landlords of businesses up and down the country are focused on Tenant retention and those with buildings in secondary locations are still experiencing high vacancy levels and difficulties in attracting Tenants.

On top of this, there is the added burden being applied to commercial property owners through the requirement to strengthen their buildings to an acceptable percentage of the current earthquake code in the wake of events in Christchurch. This is currently 33% of code but we are awaiting the recommendations of the Royal Commission which are due out shortly. Many commentators are picking that they will recommend that the percentage will increase to 67% of the code which will mean even more costs for those Landlords caught in the net at a time when their buildings may be experiencing vacancies.

Indeed Palmerston North City Council has already pre-empted the commission’s findings by writing to 109 building owners advising them that they have to undertake works to bring the buildings up to 67% of the code.
Given the local pressures of such action as well as a volatile wider economic picture, the commercial property sector will not explode out of the starting blocks in the foreseeable future.

We can expect gradually reducing vacancy levels across the board but it will be some time before we see the return of the halcyon days of 2001-2007 where, quite frequently, demand outstripped supply.

Until the Eurozone crisis is played out in its entirety, one way or the other, there will be no robust domestic growth. Like it or not, we are part of a global economy and there is a price to be paid for that.

 

 

D.J. McMahon
Managing Director
McMahon Commercial

Commercial Property Investment 2012

 

 

 

 

 

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Denis McMahon

Brought to you by Property Managers Ltd: Pacific Property has been formed with the aim of building, over time, a diversified portfolio of Industrial, Retail and Commercial properties to provide strong sustainable returns to investors which will be managed by experienced property manager, Property Managers Limited (PML). The directors of Pacific Property Fund are Denis McMahon and Philip Tushingham, who together have over 45 years of experience in investing in, and managing commercial properties. “Pacific Property presents an opportunity for investors to invest in a brand new quality industrial building in Mount Maunganui and to join us as we build a quality commercial property portfolio diversified both geographically and across industrial, retail, and commercial assets.”

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