Commercial Property Outlook Up, Except the Earthquake Prone

MEDIA RELEASE

19/02/2013

Commercial Property Outlook Up, Except For Earthquake Prone Buildings

Benefits of an improved property market will not flow through to owners of earthquake prone buildings, Property Council’s Market Outlook delegates heard today.

Colliers International’s national director research and consulting Alan McMahon said there is demand for high grade buildings which are structurally secure.

“The pendulum is definitely swinging back in the landlords’ direction, with the exception of earthquake prone stock. Rents for top end buildings will go up.

“Overall the situation is pretty good. Rents in Auckland’s CBD and metro areas are improving, and we are predicting growth in the industrial market along with Wellington’s prime office market.”

However, McMahon recognises issues may arise for owners of buildings built before 1976, as the majority of these owners will be individuals who may not have the financial ability to strengthen. “Some modern buildings will need strengthening too.”

ASB Bank’s chief economist Nick Tuffley, confirmed earthquake strengthening is becoming an issue, particularly in Wellington, though he acknowledged it is also an issue in other regions.

Tuffley said cost pressures will start coming through and a key influence on the pace of the construction pick-up will be resource constraints, specifically in relation to the Christchurch rebuild.

“In Canterbury, ASB’s Cantometer shows construction activity is just higher than pre-earthquakes. There’s been quite a lot of acceleration since late last year. We are seeing early beginnings in a lift in building work over the last year or so. The real challenge will be whether we have got the right people and resources in the right place. It will be a capacity issue.”

ASB has noticed a pick-up in the property market, particularly in the second half of last year. “Our property finance book lifted strongly in the last six months of 2012, and the pipeline for this year has more than doubled. To put that in perspective, overall market credit to the business sector remains muted, so property appears to be gaining strong momentum.”

As for the national economic outlook, Tuffley said although last year saw modest growth, this year is expected to pick up. “However, we are going to have to be prepared for moments of international volatility.”

ENDS

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