Auckland, 19 February 2013 – Commercial property yields across Auckland, Wellington and Christchurch have firmed increasingly sharply over the past year, according to the latest NZ Prime Property Performance Index research published by CBRE.
Over the most recent (Dec 2012) quarter
CBRE’s assessments indicate positive firming for all cities and their respective market sectors.
Christchurch was the top performing centre with a yield firming of 13 basis points, closely followed by Auckland with a 12 basis point firming.
Over the past year
The largest change over the past year has been in Auckland, which has firmed by 50 basis points, followed by Christchurch and Wellington with 35 and 19 basis points firming respectively.
Over three years
Auckland has shown the strongest yield trend improvement over the past three years, firming by 62 basis points. Christchurch has also shown a strong yield performance, firming by 31 points.
Across the sectors, Industrial yields have performed the best over a three year period, firming by 71 basis points below their December 2009 levels. CBD retail and office are the second and third best performing sectors, with yields firming by 48 and 15 basis points respectively since the end of 2009.
Zoltan Moricz, CBRE’s Senior Director of Research & Consulting, says: “Over the past year, the industrial, office and retail investment markets in Auckland have experienced the most yield movement. The remaining market sectors experienced lesser rates of firming over the past 12 months. The main exception to the firming trend has been Wellington industrial yields which increased on an annual basis, although with some firming in the latter part of the year”.
“The firming trend is being driven by investors becoming less risk-averse. We are also seeing a broadening of investor interest, with a greater willingness among investors to take on secondary stock.”
Moricz adds that rental growth has consolidated over the last quarter, with rent performance data for the December 2012 quarter highlighting three key trends:
- The rate of rental growth in Christchurch has consolidated around recent highs with only the industrial sector driving rental growth in the latest quarter
- Auckland rents experienced minor growth in the latest quarter due to a slight increase of retail rents while office and industrial rents remained stable
- Wellington rental performance has been flat due to the ongoing impacts of rising earthquake insurance levies and the generally weak market, especially in the industrial sector.
“On an annual basis, the office sector continues to offer the best rental performance, although the markets appear to have taken a breather at recent levels during the latest quarter. Industrial rental growth has also slowed, while retail rents have recorded a slight increase in the Auckland CBD market, with Wellington CBD rents remaining static for a third consecutive quarter.
“Over the past year, there has been mostly positive sectoral performance with the majority of market sectors showing rent growth. Rental trends ranged from an increase of 8.1% in Christchurch industrial to a 5.4% decline in Wellington Industrial.”
The three year change percentages in the table show that both Christchurch and Auckland have been the best performing cities, while Wellington has been lagging behind. The Christchurch office sector has shown the largest growth, however this has been artificially influenced by the transitional shift to the suburban office market after the earthquake. The Christchurch Industrial sector has also been a top performer due to the flow on effect of rising construction costs after the earthquake, while in Auckland both the CBD retail and industrial sectors have shown moderate levels of growth.
Wellington industrial and office are the only sectors which are currently under their base three years ago, ranging from 11.7% and 8.6% respectively even though the growth trend has improved during the past year.
About CBRE
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
