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Industrial: The Darling of Commercial Property

Welcome to the first issue of Key Assets for the year!

We have some outstanding properties that are showcased in this issue, representing excellent value and opportunity for the discerning buyer.

Our commercial teams across the country are experiencing positive market conditions and good demand for product, with the markets attributing more risk to retail, hospitality and office as opposed to the industrial sector. This risk is reflected in yields that are being offered or achieved for the various asset classes. Industrial continues to remain the darling of the commercial property segment and it is unlikely that this will change in the short to medium term.

The investors risk profile will, to a certain extent, define what type of investment someone will look at. As an example government and/or blue-chip tenanted property with long leases in place will be highly sought after with the yield reflecting the lower risk profile as opposed to other categories such as vacant retail property!

Some of the key drivers and stimulants of commercial property are:

  • Low official cash rate and mortgage rates, which are likely to continue in the foreseeable future.
  • Historical low deposit interest rates that are helping channel money to commercial property through vehicles such as shares or syndication.
  • Large scale quantitative easing by the government/Reserve Bank
  • Significant government investment in infrastructure projects and stimulation through Covid-19 relief.
  • Shortage of skilled labour resulting in pressure on build costs.
  • With the strong residential market investors are considering repositioning their investment funds from residential to commercial property.
  • Owner occupiers are finding it is cheaper to own than lease.

Covid-19 is still at the forefront of our minds and fragility is evident with the recent community outbreak and subsequent three-day lockdown in Auckland with the rest of the country moving to Level 2!  As we move forward with the rolling out of vaccines across the world we will hopefully see a return to some degree of normality and light at the end of what currently seems to be a very long tunnel!   

Situations like this help drive change and have been an enhancer in many respects for change across different sectors. As an example the lockdowns during Covid-19 have allowed many businesses to consider their policies around workplace flexibility and their space requirements. The office is certainly not dead; however, the debate is on as to what the future office may look like!

We hope that the properties that we showcase provide interest and opportunity and we welcome any enquiries that you may have.

Tony Kidd
General Manager
NAI Harcourts New Zealand