Weekend Herald

Prop­erty val­ues ‘ hold up well’ in the CBD

- Auckland Region · New Zealand · Cincinnati · Hyatt Hotels Corporation · Elizabeth II · United States of America

“In many ways Auck­land’s CBD i s trail­ing be­hind the city fringe. Nonethe­less, prop­erty val­ues are hold­ing up well with plenty of de­vel­op­ment and in­vest­ment un­der way,” says James Kel­low, Direc­tor of New Zealand Mort­gages & Securities ( NZMS).

The com­mer­cial prop­erty len­der says what has hit the cen­tral city hard­est is not the eco­nomic fall- out from Covid- 19, but the City Rail Link and other ma­jor in­fras­truc­ture projects which have ef­fec­tively closed off large parts of the CBD.

“Down­town Auck­land will bounce back and will con­tinue to rein­vent it­self. Once, coun­cil pro­hib­ited peo­ple from liv­ing there, then it was filled up with in­ter­na­tional stu­dents, back­pack­ers, and Airbnbs. Now we have high- grade apart­ments and a 5- star Park Hy­att in Wyn­yard Quar­ter. Twenty years ago, the bot­tom of Queen St was lit­tered with $ 2 shops, then in came Gucci and other la­bels. Change is the only cer­tainty.” Kel­low says though the CBD is now con­gested with orange cones, the Amer­ica’s Cup at the end of sum­mer will give a boost to the down­town econ­omy. Once the $ 5b rail link is com­pleted in late 2024, Auck­land will see de­vel­op­ment of con­ve­nience re­tail and the likes around the new un­der­ground train sta­tions and more res­i­den­tial con­ver­sion of 1990’ s com­mer­cial of­fices.

While some ob­serve that 2020 may change work habits for­ever, with more peo­ple work­ing from home, the head of NZMS be­lieves the need for quality com­mer­cial of­fice space will not di­min­ish. “Sure, some con­sul­tants and some smaller SMEs have ex­changed their leases for the kitchen ta­ble, but se­ri­ous busi­nesses can’t do this. They need per­sonal in­ter­ac­tion, work­place en­gage­ment and shar­ing of ideas. They’ll keep de­mand­ing high- quality, well lo­cated of­fice space and de­vel­op­ers will keep build­ing it with ob­so­lete build­ings re­pur­posed.”

As for com­mer­cial prop­erty own­ers and in­vestors aban­don­ing the CBD, that’s not go­ing hap­pen ei­ther, ac­cord­ing to Kel­low. “Where else are they go­ing to put their money? Prop­erty as­set val­ues con­tinue to in­crease, and sure, rental yields are now well be­low 5 per cent, but still con­sid­er­ably higher than bank de­posit rates which are now verg­ing on zero. We’re not see­ing head­lines about big build­ings in the city chang­ing own­er­ship, be­cause they’re not for sale.”

“The likes of strata ti­tles are be­ing picked off, but funds and prop­erty syn­di­ca­tions are strug­gling to se­cure sig­nif­i­cant prod­uct in the CBD. They know ad­ver­tis­ing a good re­turn in the cur­rent en­vi­ron­ment will see ‘ mum and dad’ in­vestors flock to solid ‘ bricks and mor­tar’ se­cu­rity. But again, there’s just not the stock as prop­erty own­ers don’t want to sell.”

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