COMMERCIAL REAL ESTATE with Colliers of North Shore

Investor confidence remains positive

Nationwide commercial property confidence remains positive at 4%, according to Colliers International’s latest investor confidence survey. The quarterly survey is produced by Colliers’ national director of consulting and research, Alan McMahon, and his team based in Auckland CBD. It asks respondents how they feel about the commercial property market for the year ahead. The 4% confidence result shows that more of the survey’s respondents think things will get better for commercial property investors rather than worse over the next year, albeit by the fairly narrow margin of 4%.

This is slightly down on the previous quarter’s result of 7% net optimism. The reduction in investor confidence can be attributed to the fact that global economic growth continues to struggle, and does not look set to improve in the near future – rather than any specific factors in New Zealand’s commercial property market.

Auckland confidence among NZ’s highest
While Auckland investor confidence – which includes the North Shore – is down this quarter, from 28% to 13%, Auckland is still the third most optimistic centre in New Zealand.
Confidence in Auckland has risen quickly from -17% in September 2010, and also from its absolute lowest point of net -72% negativity in March 2009. This was the lowest confidence reading in Auckland since the survey’s inception.
Many businesses in Auckland are thriving, despite the global economic situation. These businesses need property to accommodate their staff and business activities – and many of these organisations are growing. We believe this will continue to provide momentum to our commercial property market in 2012.

Christchurch up to 30% confidence
The only centre to show an improvement September and December 2011 was Christchurch, rising to 30%.
Christchurch’s recent results have been highly volatile, unsurprisingly. Given that the question the survey poses is about whether things will get better over the next year, it’s predictable that most respondents will think that things can not get much worse, and this is perhaps underpinned by the emergence of real plans surrounding the rebuild of the CBD.
Queenstown is the second most optimistic centre this quarter, encouraged by good tourist numbers and a CBD where property values have recovered strongly.

Wellington most pessimistic
Of the three main centres, Wellington is again the most pessimistic at a net -18%. Concerns over new earthquake strengthening regulations are shaking confidence in the capital.
However, Wellington is the only centre in the North Island where confidence has improved in the past three months.
By sector in the main centres, industrial investors continue to be the most optimistic. Industrial tends to be the first sector to recover from an economic downturn, and it’s worth noting that investors like industrial properties, which are easy to understand and don’t require such frequent capital expenditure as offices and retail property. Christchurch industrial investors are the most bullish of all this quarter, at 42%.
Wellington office investors are the most pessimistic of all, with confidence at -35%. The survey results were compiled from 2472 responses.

Andrew Hiskens: andrew.hiskens@colliers.co.nz www.colliers.co.nz