Commercial Returns Decline For First Time Since 94
New Zealand Q3 Commercial Property Returns Decline For First Time Since 1994, IPD Says
Auckland, December 17th 2008: Commercial property returns in New Zealand fell in Q3, 2008, according to the PCNZ/IPD. The All Property Total Return fell -0.31% in the three months to September 30th marking the first time property has declined on a quarter on quarter basis since the index began in 1994.
Capital values slid -2.03%, down from +1.54% in the preceding three months. Income return remained largely unchanged from the preceding quarter at 1.74%, up from 1.72%. The NZ LPT Property Index returned -4.3% in the three months to Sept 30th, 2008, while the CSFB NZ GS Bond Index earned investors 4.23% over the period.
Further declines are expected as valuers have been hampered in their efforts to appraise the value of buildings due to a lack of transactional evidence.
“With the significant reduction in credit, a global recession, and the collapse of equity markets, the Real Estate sector is reacting to the uncertainty regarding future economic growth”, commented Mr John Garimort, Director for IPD. “The material strength of the previous quarters has obviously influenced the rolling annual return of 10.7%, but the valuation community are now reflecting the economic downturn and lack of motivated buyers in their expectations of where value rests in the New Zealand Market.
Industrial performed the worst, producing a total return of -1.44. Retail slid -1.4% and CBD Offices produced a small positive return at 0.48%.
On a 12-month rolling basis, New Zealand All Property Composite has returned investors 10.7%. That compares with 22.3% to September last year.
The diagnostic tools that accompany the report indicate that while all assets are valued within the past 12 months, almost a third of the sample had valuations recorded for the September calculations. This adds to the structural integrity of the index as a barometer of investment returns for the sector.
The PCNZ IPD Index is New Zealand’s leading benchmark for commercial property investment returns. The figures are based on analysis of 281 properties, valued at in excess of $6.9 billion.
Notes to editors:
IPD is a global information business, dedicated to the objective measurement of commercial real estate performance. As the world’s number one provider of real estate performance analysis for funds, investors, managers and occupiers, we offer a full range of services including research, reporting, benchmarking, conferences and indices. We operate in over 20 countries including most of Europe, the US, Canada, Australia, New Zealand, South Africa and Japan. Our indices are the basis for the developing commercial property derivatives market, and the most authoritative measures of real estate returns worldwide. For further information visit www.ipd.com.
The PCNZ/IPD index now tracks the performance of 336 property investments, with a total capital value of almost $9 billion.
About Property Council New Zealand
Property Council is New Zealand’s property voice, representing New Zealand's Commercial, Industrial, Retail, Property Funds and Multi Unit Residential Property owners, investors and managers. Property Council has branches throughout the country with members representing some of the largest commercial property portfolios in Auckland, Wellington, Christchurch and Tauranga, the value of which exceeds $20 billion.