Disruption is the buzzword in business right now as the pandemic dishes out twists and turns to challenge us all. However, business, consumer and investor confidence is steadily lifting, influenced by a strengthening economy, low interest rates and a growing belief the worst of Covid is now behind us.
The commercial property market continues to face all of its trials head-on and the trends make for positive reading:
INDUSTRIAL SECTOR – current mood: Positive 👏🏼
Vacancy rates remain low as the industrial sector shows incredible resilience to Covid’s bite. Quality stock is in short supply and investor demand is intense. Viranda’s relationships with commercial agents is proving invaluable for accessing off-market deals and in turn slowing down the frenzied buying approach. Once we have something under contract, we have protected clients from others coming in and creating a price bidding war, or from going unconditional before robust due diligence is completed.
The construction sector is rapidly expanding, which in turn drives the need for quality space – particularly as the government unfolds its infrastructure programmes. eCommerce growth has also fuelled investor demand for warehousing space.
Overall, yields in the industrial market range from 3.75 to 5 percent across the nation. The landscape is competitive and exciting and we would be delighted to discuss the opportunities with you.
OFFICE SECTOR – current mood: Cautious 🤔
Increased productivity, culture, learning and staff retention are the key reasons why the office setting is here to stay. Working from home was forced upon us with Covid-19, but returning to the office has shown that staff missed the social connection and a little competitive rivalry among colleagues.
While vacancy rates have lifted in most centres over the past 12 months, the forecast around larger office occupiers sub-letting doesn’t appear to have played out. Tenants are faced with a wider choice of options and are taking the chance to upgrade, with a focus on prime buildings and locations. Secondary locations are more challenging for landlords and we have seen strong rental incentives being offered to secure the right tenants.
It is anticipated that office vacancy space in quality buildings will continue to stabilise, especially as/when our borders reopen.
RETAIL SECTOR – current mood: Motivated 💪🏼
High calibre tenants in good locations are continuing to attract investor interest. Average yields for Auckland prime CBD appear to be 5-6 percent and for Auckland regional centres, 4.5-7 percent.
Overall, both tenants and landlords are feeling optimistic as business confidence increases. City workers returning to the office after a series of lockdowns is having a positive impact on trading. Consumer spending is also bolstered by less overseas travel and more local spending, along with an increase in DIY materials being purchased for home-based projects.
It appears that retailers who are equipped for online trading are recovering better than those who offer an instore experience only.
Retail investment deals continue (particularly in high profile locations), however most of them (especially secondary space) are being completed with strong incentives or reduced rental rates.
Landlords are striving to secure high calibre tenants, matched with strong lease agreement terms to give them security.
Final Note
If you are considering investing for the first time or would like advice about growing your existing portfolio, please reach out – we are ready to find you a ‘jewel in the crown’ property.
