To answer this question, we first need to look at some of the key influences that are likely to shape commercial property markets in New Zealand.

The low interest rate regime, which is unlikely to change in the short to medium term, and continued government stimulus spending, both bode well for commercial investors in the year ahead. However, the ever-evolving story around Covid-19 from both a local and international perspective will continue to create an element of uncertainty.

Covid-19 and the resulting border closures has had an impact on net migration which fell to 52,374 in November 2020 from a high in March 2020 of 95,529, however once our borders open, New Zealand will continue to be an extremely desirable country to immigrate to.

The increasing popularity of online retail shopping and working from home also have ramifications for a number of asset groups, resulting in pressure on rental rates, incentives and yields. Whilst office and retail space will continue to face challenges, these property sectors will provide opportunities for the astute investor.

Industrial property is expected to remain the darling of the investment markets with continued strengthening of assets that have a sound location and strong tenant covenants. Robust demand is coming from a variety of sectors including owner occupiers, who are finding that they can own premises, often for less than what they would pay in rental! This is creating upward pressure on industrial zoned land values and investment values.

Other market players that are active include syndicators, who are proving popular with investors, with returns being offered well above what banks are offering for money on deposit. Overall, it looks like we are in for another exciting year in the commercial property sector!

Tony Kidd
General Manager, NAI Harcourts New Zealand

This article is featured in NAI Harcourts Market Leader Issue 1, 2021