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CBD office returns soar

The latest figures from the Property Council of New Zealand’s Investment Performance Index survey show commercial property investors receiving an average return of 17.88% in the year to June 2006, at a similar level to the 18.10% investors earned on average for the previous year.

Saturday, September 30th 2006, 12:00AM

by The Landlord

“While income returns have dropped slightly to 8.95%, it is the continued strong increase in capital value in the CBD office sectors that has helped maintain the high overall total return over the last twelve months,” says Property Council national director Connal Townsend. “This is illustrated by the capital returns for each sector, ranging from 2.07% for NZ Bulk Retail to 13.15% for NZ CBD Office,” he says.

Property Council research chair, Alan McMahon, says “Diminishing income returns are an inevitable consequence of increasing capital values, a result of firming cap rates. The total return numbers are the key, and these remain robust. CBD office assets performed better than non-CBD offices, perhaps a sign that a proper value differentiation between prime and secondary assets is being restored.”


NZ CBD Office took over the top spot this quarter, reaching a new all time high total return of 23.37% (up from 18.45% in June 2005). This was driven by a significant increase in capital return over the last 12 months, from 8.15% in June 2005 to 13.15% in June 2006.

The Auckland CBD Office sector also continued its recent rapid improvement to record a total return of 23.36%, up from 15.34% in June 2005. The Wellington CBD Office market maintained the high returns seen over the last 18 months, dipping only slightly to a total return of 22.06% (down from 24.52% in June 2005). The Auckland Non CBD Office category experienced a significant a decrease over the last twelve months – recording a total return of 12.85% (down from 17.76% in June 2005).

The two industrial sectors could not maintain the record returns seen over the last 12 months, with figures for both sectors dropping significantly. NZ Industrial experienced a total return of 15.27% (down from 22.73% in June 2005), with Auckland Industrial returning 15.13% (down from 22.41% in June 2005).

Three of the four retail categories experienced a decrease in total returns over the last 12 months, with only NZ Shopping Centres recording an increase. The shopping centre category recorded a total return of 16.20% in June 2006, up from 15.15% in June 2005. The Bulk Retail category returned 11.15%, down from 14.49% in June 2005. The ‘Other Retail’ sector (combined small shopping centres, small bulk retail outlets and strip retail) returned 13.04%, down from the total return of 20.55% experienced in June 2005. The combined retail category returned 15.07%, down slightly from 15.35% in June 2005.

Seventeen property owners and managers provide information to the Investment Performance Index. The figures are based on analysis of 263 properties.

« Property investors refocus on cash flowChanges needed to Taxation Bill: Property Council »

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AIA 4.55 ▼2.29 ▼2.59 ▼2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
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China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
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ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.79 2.79 3.15
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
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The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.79 2.99 2.80

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