Commercial Perspective

Posted on Thursday, August 13 2015

As we move through the winter of 2011, there is clear evidence that we have experienced the bottom of the cycle as far as commercial property is concerned.

Research from CBRE shows that 2012 will see an economic rebound based upon,
– Labour market recovery
– A cyclical rebound in business and trading partner growth
– An element of pent-up demand ready to be unleashed
– Underlying population growth

The economic recovery will have a favourable impact on office markets across the country according to CBRE. In Auckland, both prime and secondary rents appear to have finally stabilised after dropping 21% and 29% respectively from March 2008. In Hamilton, rents have been more resilient with prime rents at $226 m2 which is actually above its historical peak of $224 m2 set in March 2008. The office vacancy rate in Hamilton increased from 10.3% to 12.1% in the six months to the end of 2010.

In Wellington, effective net rents have softened steadily since reaching their peak in the December 2008 quarter with prime and secondary rents falling by 18% and 28% respectively. Vacancy is forecast to increase considerably this year as the result of significant new office coming on stream and the public sector being forced to tighten spending.

The inescapable conclusion is that, as we have always maintained, commercial property does not exist in isolation to the general economic environment and its performance over the last three years is certainly proof of that.

However, compared to the likes of the finance company sector, it has the undeniable appeal of durability as an investment based upon its constituent parts of bricks and mortar and land. This has held true since 1066 and does not look like changing any time soon.

D.J. McMahon
Managing Director
McMahon Commercial

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