Commercial, industrial sales likely topped $12 billion
Heightened investment activity looks set to propel the total value of commercial and industrial property sales in New Zealand past $12 billion in a year for the first time.
The final figures will be confirmed in the coming months but the industrial, office and retail sectors experienced rising occupier and investor demand in 2021, spurred on by positive economic conditions that supported occupier fundamentals and transactional decision-making.
While safe haven assets, particularly prime grade industrial, supermarket and large format retail premises, have continued to attract the highest levels of investor interest, improving sentiment has seen competition emerge for a broadening range of assets.
Ian Little, associate director of research at Colliers, says the industrial market again proved itself as the premier asset class.
“The industrial sector was bolstered by a further strengthening of market fundamentals over the year. Occupier demand has increased, driven by growth across multiple sectors, while the ability to increase new supply remains constrained, a combination which has seen vacancy rates falling to historically low levels resulting in upward pressure being applied to rents,” Little says.
“Increased competition for assets is likely to see the annual total value of industrial sales top $6 billion for the first time.
“Confidence in the sector is clearly illustrated by results from Colliers’ latest investor sentiment survey, which shows the sector generating a net positive (optimists minus pessimists) rating of just under 69 per cent, the highest recorded since the inception of the survey.”
Auckland is the most active industrial market, accounting for approximately one-third of sales over recent years. There has also been significant interest in the Waikato, Bay of Plenty and Canterbury regions. Sales activity in many markets has only been constrained by a limited number of properties being released to market.
Interest rates have begun to rise, with further increases signalled for 2022, which is likely to temper further value appreciation, particularly given the magnitude of growth rates apparent over the past two years.
The office sector is likely to account for around 20 per cent of 2021’s commercial and industrial sales based on sales evidence and 20 years of sales trends.
Thomas Smeed, research analyst at Colliers, says despite Covid-19 influenced changes to work practices, investors continue to show confidence in the office sector.
“Prime grade assets, when brought to market, have attracted high levels of competition resulting in yield compression,” Smeed says.
“The scale and higher value of office premises, particularly in main CBD markets means that the number of transactions within the sector lags behind that of the industrial and retail sectors, accounting for approximately 12 per cent of total transactions but generating 18 per cent of total sales values.”