Commercial Market Confidence Remains Mixed

NEWS RELEASE

Thursday, 8th December 2011

Commercial Market Confidence Remains Mixed

At the launch of NAI Harcourts’ most recent commercial property market research, Chief Executive Officer, Chris Nicholl said that “the recent economic uncertainty from other regions filtering into Australia and New Zealand has impacted negatively on market confidence in the property sector in Australasia”. “However the reduction in official interest rates in Australia and the return of the Key Government in New Zealand were both welcome stabilising factors in the market looking forward”.

In the latest NAI Harcourts report which focuses on Australia and New Zealand exclusively, each of the commercial property markets and sectors are reviewed across the major cities in both geographies.

The report identifies that office property remains the strongest performing commercial property sub-sector after hotels in Australia, and highlights WA as the best performing of the Australian office property markets.

It also confirms that capital value expectations for the office market have been scaled back in all states and points to the recent capital transactions having been concluded by Asian acquirers, notably Chinese buyers. “Auckland is the strongest of the office markets in New Zealand. With vacancy rates below 5 per cent for prime space and limited new supply, value expectations remain stable. The future for Christchurch is looking brighter given planning is progressing quickly to enable the rebuilding of the CBD with both investors and tenants showing interest in the market,” Mr Nicholl said.

The report claims that conditions in retail property have continued to turn down further and that global market uncertainty has seen a diversion of discretional spending and general belt tightening. As a result, forward expectations are also being revised down, with the view in relation to retail property to remain negative through much of 2012 before rising modestly in 2013.

“Notwithstanding the impact of the high Aussie dollar on manufacturing and the resulting loss of jobs in the sector, the industrial property market in Australia is expected to emerge as one the strongest performers over the next 1-2 years,” Mr Nicholl remarked. In New Zealand, the industrial sector is experiencing low vacancy rates in Auckland. This has been seen as a positive in terms of pre-commitment led construction, however the market and lending policy has not yet softened to the point of speculative construction. In Wellington, industrial property continues to be the best performing asset class on the back of stronger than expected manufacturing output. Owners have also responded well to the earlier rising vacancy and adjusted their incentives structures to attract leasing enquiry stemming the tide of growth in the vacancy rate. Expectations are for steady reduction in incentives creating a corresponding growth in effective rents and values.

About NAI Harcourts:

NAI Harcourts is the Australasian member of the NAI Global.

NAI Global is the premier network of independent commercial real estate firms and one of the largest commercial real estate service providers worldwide. NAI Global manages a network of 5,000 professionals and 350 offices in 55 countries throughout the world. NAI professionals work together with our global management team to help our clients optimise their real estate assets. NAI offices around the world completed over $45 billion in transactions annually and manage over 300 million square feet of commercial space.

ENDS

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