Office sector tipped to dowell
The office sector is emerging as a clear favourite for investors, according to a new survey. Investors in Auckland, Wellington and Christchurch think the office sector will outperform others over the next 12 months, with a net positive 35 per cent of respondents predicting better conditions ahead, a report by Colliers International says.
However, Christchurch has lagged slightly behind.
Colliers International’s associate national research director, Chris Dibble, said this is due to the longer than expected backfill of the central business district, which is now starting to see a bit more momentum.
New Zealand’s office sector continues to provide investors with solid return profiles supported by positive underlying fundamentals, he said.
Dibble said that this was attracting new and old to the sector, which saw a buoyant period of purchasing activity over the financial year to June 2016.
The survey, which asked how investors think demand, supply, rents and investment yields will perform over the next 12 months, showed investor confidence was up nationwide, now at a record high 32 per cent net optimism.
The Auckland office sector was at record highs.
A net positive 70.8 per cent of investors surveyed were confident in the sector’s performance across occupancy rates and rental and capital appreciation for the next 12 months.
That was the highest level of confidence across the entire commercial property sector in Auckland, and the highest rate recorded since the survey began in early 2006.
Investors in Wellington commercial office properties are also in a positive mood. Although lower than Auckland with a net positive 29.9 per cent, this was the highest of all commercial sectors in Wellington and the highest recorded since the Wellington survey began in mid-2008.
Enthusiasm for the industrial and retail sectors also reported at higher levels than normal.
Hamilton’s office sector is also thriving.
Hamilton property developer Matt Stark has been in the industry for about seven years. Office stock takes up about 70 per cent of his work.
He said confidence in the sector was driven by yields.
‘‘People have always been a bit shy of offices and its been a bit sluggish but because the yield has been compressed they’re getting a better deal.’’
His desire to develop office spaces was driven more by the ability to be more creative, he said.
‘‘We love doing creative stuff and spaces. Offices has been the most under-designed. We like working with businesses.’’
His latest triumph has been a $6 million transformation of a four-storey building on the corner of Knox and Anglesea streets, which has been fully tenanted.
The building is due to be completed in November and will accommodate about 200 people.
The building, which was built in about 1960, was stripped back to its original shell.
‘‘A lot of our tenants are in the IT sector and we’ve seen a lot of growth in that. We’ve shifted a lot of companies around town that are growing. ‘‘
NAI Harcourts Waikato managing director Mike Neale said a well-tenanted property was the drawcard for investors above all else.
‘‘It’s all about long leases with national or international tenants. It doesn’t matter if it’s industrial, office or retail,’’ he said.
‘‘Investors will purely and simply be driven by the quality of the tenant and length of lease. I think every commercial agent in Hamilton will agree with that.’’