COMMERCIAL REAL ESTATE with Colliers of North Shore

commercial property with Andrew Hiskens, Colliers North Shore

Commercial property investor confidence remains

Nationwide commercial property confidence remains positive at 7%, 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.

The 7% 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 7%.

The research shows things look to be on the up over the longer term, with all centres surveyed this quarter showing an improvement in confidence compared with a year ago.

Auckland confidence NZ’s highest
While Auckland investor confidence – which includes the North Shore – is down slightly this quarter, from 32% to 28%, Auckland is still the most optimistic centre in New Zealand.

Confidence in Auckland has risen quickly from -17% a year ago, 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.

Businesses and other organisations need property to accommodate the people who carry out the manufacturing, selling, service provision or whatever the business activities are. If businesses are growing, more people are needed, and that usually means more property is required. This is a rather simplified analysis but it does provide a core driver to the commercial property market in Auckland, where many businesses are now doing well following the downturn.

Queenstown and Christchurch up
The only centres to show an improvement between June and September this year were Queenstown and Christchurch, rising to 23% and 25% respectively. Queenstown has been up and down over the past few years but is now riding high, encouraged by good tourist numbers and a CBD where property values have recovered strongly.

Christchurch’s recent results have been highly volatile, unsurprisingly. Given that the question is about whether things will get better over the next year, it’s predictable that most respondents will think so, and this is perhaps underpinned by the emergence of real plans surrounding the rebuild of the CBD.

Wellington most pessimistic
Of the three main centres, Wellington is again the most pessimistic at a net -25%, down from -15% three months ago. This is in part influenced by the upcoming election.

Respondents are aware of the fact that if a National-led government is re-elected, it may take action to further reduce public sector headcount and this has influenced Wellington’s commercial property confidence level, particularly in the office sector.

Concerns over new earthquake strengthening regulations are also shaking confidence in Wellington.

Investor confidence in Hamilton remained stable at 8%. 2011 has seen confidence return to the market in the Waikato, with investors realising that they have weathered the storm relatively well.

The history of the Hamilton market is one of lower volatility, with investors, on average, taking conservative positions especially in respect of debt. The consistent stream of good news from the diary industry and, to a lesser degree, the sheep and beef sector has underpinned investors’ views that the foundations are in place for a genuine, sustained improvement.

Dunedin investor confidence experienced the most significant decrease, falling by 14% to -4% in 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.

Wellington office investors are the most pessimistic of all, with confidence falling to -40%.

The survey results were compiled from 2882 responses.

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