According to John Urlich, commercial manager at Barfoot & Thompson, investor demand remains strong and this quarter has ended positively, with the company’s team concluding a record number of transactions and many larger sales.
He says the tax effectiveness and assured gains from “bricks and mortar” continue to outperform the low returns from banks.
In addition, the supply of available listings remains tight and the strain on the leasing market is not dissimilar, with low vacancy rates a consequence of the lack of available stock.
“Auckland’s property market has continued to strengthen over the last 12 months. Investor demand for stock continues to outstrip supply and, combined with low interest rates, has created downward pressure on yields,” points out Urlich.
“Vacancies for industrial property right throughout the Auckland region are at all times lows, putting pressure on rentals, incentive levels and land prices.”
Urlich notes that the volume of sales during 2015 was down from a peak in 2014 but continued to exceed the long-term average.
“The volume of sales was limited by a lack of stock rather than investor demand or access to credit,” he says. “However, the challenge associated with sourcing sufficient good quality property investments in Auckland has increased investor interest in Wellington and in the provincial centres.”
Urlich says the retail market has “an interesting dynamic”, with retailers competing strongly against each other for market share in traditional shopping centres as well as on Main Street.
“Demand for retail space has been mixed over the last year, with vacancy rates falling in some locations while others experienced an increase.”
He says the industrial market has continued to go from strength to strength, with demand from occupiers similarly continuing to push down vacancy rates and good quality vacant stock becoming increasingly difficult to find.
“As a result, prime industrial rents have started to increase and are rapidly approaching levels experienced at the peak of the 2007/2008 cycle. Land values have continued to increase and development sites costs are $350 to $400 per sqm in established areas with the demand for new modern premises continuing to be unsatisfied.”rform the national growth rate.
“Population growth in excess of three percent per annum, increased construction activity, growth in tourist arrivals, and low interest rates all support the continued expansion of the local economy. The growth in Auckland’s economy will continue to drive growth in commercial and industrial property markets.”