With the arrival of the Delta variant, New Zealand was immediately thrust into Level 4 Lockdown. Thankfully the cases were not widespread and after a relatively short timeframe our region is largely up and going again. Going early and hard has provided business with more confidence that the virus has been contained and the short duration has meant that the bulk of businesses have barely missed a beat.The past quarter has by in large meant much of the same. Industrial leasing stock is now at historically low levels putting upward pressure on rental rates. Land sales over the last year has been at unprecedented levels with Te Rapa Gateway, Northgate (Horotiu) and Titanium Park (Airport) all but sold out. While ultimately this will result in more industrial stock, whether that be new or the existing property being vacated, that takes time to filter through. In the last three or four years this has tended to be absorbed at the rate it is being built because of the lead times involved. Land has been transacted at record levels and with pressure on building costs this is also driving up rental rates. Ultimately this also has a positive effect on existing stock in a rising tide. We are also hearing that there is a trend towards an increase in NZ based manufacturing while business owners look to mitigate supply chain issues and exorbitant shipping costs. This negates some of the labour cost competitive advantage those emerging countries have. This will ensure both industrial stock and the labour market remain very tight while also encouraging advancements in technology.
Office accommodation does have higher rates of vacancy and a void has opened up between new and older stock, in terms of rental rates. The trends to smaller footprints have meant that businesses can enjoy a better standard of quality while leaving their rent expense largely unchanged. Those owners of existing stock unwilling to reinvest are being left behind or ripe for sale for redevelopment.
Retail continues to be an evolving sector with the expansion of e-commerce and the impact of another lockdown on the hospitality sector. The upward pressure on interest rates has yet to have a material effect on the market and the recent lockdown is expected to delay those rises further. While there have been early signs that higher lending rates are being quoted to borrowers, capitalization rates remain unaffected and at historically low levels. The lack of supply and rising land and building costs is expected to suppress these still for the foreseeable future.
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Lodge Commercial agents