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New Record High for Wellington CBD


New Record High for Wellington CBD

Returns from investing in New Zealand commercial property have maintained the high levels reached in recent quarters, with most sectors showing increases from returns in March 2005, according to Property Council National Director Connal Townsend.

Latest figures from the Property Council of New Zealand’s Investment Performance Index survey show commercial property investors receiving an average return of 18.44% in the year to March 2006, well above the 16.69% investors earned on average for the previous year.

“While income returns have remained steady at 9.05%, it is the continued strong increase in capital value that has driven the total return growth over the last few quarters,” says Mr Townsend. “This is illustrated by the capital returns for each sector, ranging from 4.57% for Auckland Non CBD Office to 14.53% for Wellington CBD Office,” he says.

Property Council Research chair, Alan McMahon, says “These numbers illustrate the continuing effects of capital gains. To residential investors capital gain is typically required to make a low rental return palatable. In the commercial property market however, investors have been enjoying 8% to 10% rental or income returns year after year, so when capital gains occur on top, the results can be outstanding."

Wellington CBD Office returned to the top spot this quarter, reaching a new all time high total return of 24.98% (up from 21.01% in March 2005). This was driven by a significant increase in capital return over the last 12 months, from 9.39% in March 2005 to 14.53% in March 2006. The Auckland CBD Office sector continued its recent rapid improvement to record a total return of 16.84%, up from 14.41% in March 2005. The Auckland Non CBD Office category was the only office sector to experience a decrease over the last twelve months – recording a total return of 13.90% (down from 16.58% in March 2005).

The two Industrial sectors could not maintain the record returns seen over the last 12 months, with figures for both sectors dropping significantly. NZ Industrial experienced a total return of 15.96% (down from 22.68% in March 2005), with Auckland Industrial returning 15.92% (down from 22.28% in March 2005).

Three of the four retail categories experienced an increase in total returns over the last 12 months, with only ‘Other Retail’ (combined small shopping centres, small bulk retail outlets and strip retail) recording a decrease. The Bulk Retail category returned 14.11%, up from 11.91% in March 2005; the Shopping Centre category recorded a total return of 19.80%, up from 13.49% in March 2005; and the combined retail category returned 18.41%, up from 13.61% in March 2005. The ‘Other Retail’ sector returned 14.31% in March 2006, down from the total return of 19.73% experienced in March 2005.


See... PCNZ Investment Performance Index - March 2006 (PDF)

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