Prediction for another buoyant year ahead
The Auckland commercial property market looks set for another good year.
The very strong momentum that was evident in the Auckland commercial and industrial property market in late 2015 looks set to continue into 2016, says John Church, national director, commercial for Bayleys.
“The performance of the commercial property market is closely aligned to a number of key economic indicators and these are looking good for another buoyant year for Auckland commercial property investors,” Church says in his introduction to Greater Auckland magazine which launches Bayleys’ first commercial and industrial portfolio marketing initiative for the year.
He says latest available GDP figures show a very healthy growth rate of 3.5 per cent for Auckland in the September 2015 year, well ahead of the 2.4 per cent increase for the rest of New Zealand and the city’s 10 year trend average of 2.1 per cent.
Church cites Auckland Council’s quarterly economic update released in December in which chief economist Chris Parker says the Auckland economy continues to grow relatively strongly with record levels of net migration boosting investment, retail spending and employment.
“In particular, Auckland’s economic performance is being underpinned by continuing employment growth,” says Church. “There is a strong correlation between employment and the commercial property market as more jobs create increased demand for business premises.
“This is pushing vacancy rates down to low levels across many of Auckland’s industrial, office and retail markets. With a limited amount of big new development scheduled for completion this year, property owners will benefit from a market that is heavily weighted in favour of landlords. This will result in a further whittling away of tenant incentives and continuing rental growth.”
Church says the flood of new immigrants choosing to make Auckland home shows no signs of abating, despite government efforts to encourage settlement in other parts of the country. Just over half of the record influx of 120,900 migrants who stated an address when entering New Zealand in the November 2015 year indicated they were intending to live in the Auckland region.
“This is hardly surprising given it offers the best employment and education opportunities,” says Church. “Auckland’s rapidly growing population is a show of confidence in the city and will support continued economic growth. It will also increase the demands on housing and transport. Both Auckland Council and Government have set some ambitious targets for increasing Auckland’s housing supply which they are still a long way off achieving − so expect plenty of focus on this in 2016.
“This, in combination with high levels of non-residential construction, particularly in the infrastructure area, will add further impetus to the industrial property market.”
Church says ‘Witches hats’ (traffic road cones) will become an even more prevalent feature of Auckland’s landscape and businesses and motorists need to be prepared for a disruptive few years as key transport infrastructure projects, such as the inner city rail link and the Western Ring Route, take shape.
John Church, Bayleys.