New Zealand’s commercial property market is tipped to grow steadily during the next five years according to the latest forecasting by the Colliers Research team.
Key takeaways following their recent analysis of major trends across Auckland and Wellington suggest office vacancy rates will fall in the supercity amid a rise in rental rates.
Meanwhile, the industrial market will continue to see strong demand for warehouse space, and the retail sector is expected to recover in both cities as the economy returns to more stable growth.
While short-term trends have highlighted subdued activity in various corners of the commercial property market during the past two years, Hamish Fitchett, National Director of Research & Economics at Colliers, says things should look rosier by 2030.
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“The industrial sector has long been an attractive asset class for investors in Auckland, and the ongoing shift to a gig economy and a greater need for warehousing should keep vacancy rates low in Auckland, likely below 2 per cent,” Fitchett says.
“Further land being freed up for industrial use would also provide more options for developers and investors, and we are forecasting rental growth of approximately 3 per cent over the next five years.”
The research from Colliers pointed to a fall in retail vacancy rates in Auckland CBD, although demand for new space will be limited with the bulk retail sector expected to significantly grow its footprint.
Large-scale office projects that are planned in Auckland include 35 Graham Street, the development of the Downtown Car Park site by Precinct, and Bledisloe House.
“Looking at the office market in Auckland, our forecasting suggests we will see an additional 60,000sq m of space come online through the development pipeline that will moderate the fall in vacancy rates. Office rents are expected to grow at an average rate of 2.8 per cent per year over the next five years.”
Meanwhile, in Wellington, Fitchett says the story for the office market will be the rise in the availability of premium space, such as the new premises at 55-61 Molesworth Street, which will house the Ministry of Foreign Affairs when it opens.
“We expect to see the level of premium office stock almost double in Wellington by 2030, along with strong growth in the availability of A-grade space. The premium office market, which is space considered above A-grade, is relatively new for Wellington and this influx of space through future developments will be in high demand.”
While there is limited room for new retail developments in Wellington, the redevelopment of the Reading Cinema complex on Courtenay Place will provide a boost to that area of the CBD.
With consumer spending likely to pick up during the next five years as the economy makes a recovery, Wellington’s retail vacancy rates will track down from the current figure of 9.3 per cent to 6.1 per cent at the end of 2030.
“Overall, five-year forecasting is not without risk given the possibility of future economic shocks but we foresee the commercial property market continuing its path to recovery following the recent economic downturn in New Zealand.
"The way our workplaces look and feel may be changing, but the demand for workplaces remains robust across our projections.”
- Supplied by Colliers
