Auckland, 15 August 2012 - New Zealand’s commercial property market is through the worst of the downturn, with an increasing number of market participants positioning themselves to take advantage of future opportunities, according to Dr. Nick Axford, CBRE’s head of Asia Pacific research.
Dr. Axford is visiting New Zealand from Hong Kong to provide insights into local and global trends at CBRE’s Auckland Market Outlook 2012 event today and in Wellington tomorrow.
In his presentation to a room full of Auckland property professionals, Dr. Axford said that after a steady but sustained improvement in investment confidence and activity globally, there has been a tailing off during 2012 which has coincided with a general weakening in tenant demand and a moderation in office rents.
“The huge uncertainty surrounding the global political and economic outlook is having a material effect on real estate activity. Occupiers are cautious about the prospects for their business, and are generally reluctant to make major capital commitments unless absolutely necessary. This is impacting on employment growth and demand for space in most markets around the world, which in turn is reducing the prospects of rental growth,” said Dr. Axford.
“A similar pattern is evident in capital values, with growth momentum stalling, largely due to this moderation in rental growth expectations. Prime asset values are generally holding up well around the world, as investors continue to adopt a ‘risk off’ attitude and target the best buildings in the best locations, with lease length and tenant quality key considerations.
“There is no shortage of demand for prime assets, but investment volumes are being affected by reduced debt finance and the unwillingness of existing owners to sell top quality assets.”
Dr. Axford says that uncertainty is set to remain a key theme in both occupier and investment areas of the Asia Pacific, largely driven by concerns over events elsewhere in the world. “Whilst a general improvement in sentiment now looks unlikely until early next year, it is likely that Asia Pacific will benefit first, and benefit most, from any upturn in the global outlook. Once multinational corporates and investors start to focus less on capital preservation and more on growth, this region will be a key focus for activity.”
Looking at the New Zealand market
CBRE’s Head of Research for New Zealand, Zoltan Moricz, said that while the world’s uncertain economic picture will impact on New Zealand, there are counter-cyclical economic drivers in this country.
“Top of mind is the Canterbury earthquake rebuild. Reconstruction spending will provide a roughly $20 billion stimulus with this activity peaking in 2014. This does not just impact on the Canterbury economy. The Canterbury rebuild will benefit business investment and economic activity throughout New Zealand with a significant economic impact on Auckland.
“The pick-up in domestic economic drivers should offset the fall off in the external sector in 2012 and 2013 and result in an increasing rate of GDP growth.”
Investment demand is being directed at Australia over the past year from both Asian and Western sources and Moricz supports that Dr Axford’s view that there are real synergies available for those investing in Australia and New Zealand.
“This implies that New Zealand will be subject to and benefit from increasing levels of demand from offshore private and institutional investors in the coming year.”
View the Auckland Market Outlook presentation
View the Wellington Market Outlook presentation
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