A review of local and international commercial and industrial property activity over the past year by Colliers highlights that the return to Covid-19 enforced restrictions will most likely be temporarily disruptive, but demand will remain buoyant and likely return strongly upon entering lower Alert Levels in September.
In a recently released Colliers Research report, Chris Dibble, head of research at Colliers, notes that with a previous lockdown experience to review, the impacts on supply seem to far outweigh the impacts on demand in these situations, and for many, but not all, there are a lot of positives.
“We have entered the latest lockdown in a strong position with lots of momentum, which will support many of the property sector’s underlying fundamentals,” Dibble says.
“This can be seen in the way that post New Zealand’s first national lockdown, the economy rebounded strongly, unemployment reduced to just 4 per cent and consumer spending surged across many sectors.
“The strength and momentum of the economy going into the lockdown, and the continuation (for now) of a low interest rate environment, provide an encouraging outlook for property markets as and when social and economic restrictions are eased.”
“This confidence swiftly resulted to a lift in transactional activity, which has led to one of the strongest starts to annual transaction activity on record,” Little says.
“While currently in a lockdown situation, anecdotal evidence from Colliers’ agency teams highlights that a vast majority of transactions which were agreed prior to the latest lockdown are progressing where possible.
“Transactions which have not progressed yet generally reflect Covid-19 enforced technical constraints, such as the inability to physically inspect premises or get the necessary documentation, as opposed to any real lack of demand.
“And while the leasing market has not been as active as the sales market due to restrictions on inspections, the recent announcement of future moves by Deloitte and BNZ in Auckland’s CBD, the latter being the largest office leasing deal this decade, are a strong illustration of confidence in the resumption of major office occupation.”
When looking to the future, Dibble says the outlook for many parts of New Zealand’s commercial and industrial property markets over the next 12 months is encouraging.
“The reimposition of lockdown conditions and the uncertainty regarding exactly how long restrictions will be maintained in Auckland will clearly disrupt activity. However, the benefit of experience gained over the last year will help to mitigate many of the potential negative expectations that appeared from the previous lockdown.
“These features, along with the fact that restrictions are already being eased across a majority of the country, is likely to see the slowdown in market activity being less pronounced this time than it was in 2020.
“While sentiment and activity are seemingly in a better position, cautious and confident will likely be the approach of many investors, despite the current positive demand and supply dynamics.
“Investors will be cognisant of the projections of the increase in the official cash rate ahead as the Reserve Bank looks to tackle inflation, house price surges and keep employment levels strong.
“However, given increases in interest rates are likely to be incrementally adjusted over the short term and that the moves are from record low rates, the impact upon market activity should be limited providing a clear signal for an active market ahead.”