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Total returns for commercial property as measured by the PCNZ/IPD Investment Index in the chart to the right show a pleasingly cyclical nature. The stability of the income returns shown as blue bars through the period illustrate one reason why commercial property is less volatile then residential – the income returns (effectively the cap rate ) – continue through thick and thin and investors are not reliant on capital gains to make the investment worthwhile. Having said that, only a very small proportion of the office stock in the index was valued, and it will not be until the March quarter results issued in late May that we will be able to tell if the recovery is continuing in this relatively smooth fashion.

There has been a bit of press about our Confidence Survey, and all respondents will have received a copy of the results. We will not dwell on it further here except to say that – Christchurch excepted – the recovery in both larger and smaller centres underpins the perception that a recovery is under way. Nine out of eleven centres recorded improved confidence. A note of caution has to be sounded however, given that most business and consumer confidence surveys are going in the other direction. The Westpac McDermott Millar consumer confidence is illustrated, note the scale for that is on the left Y-axis. If property is a lag indicator of general economic conditions then a reversal of property confidence improvements might be expected.

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