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Optioning commercial alternatives

Booming commercial property sector could offer alternatives to investors worried about what lies ahead for the residential property market.

Wednesday, May 25th 2016, 2:00PM

by Miriam Bell

Commercial property returns are now at the highest since the GFC, according to the Property Council’s Quarterly Property Index for the first quarter of 2016.

The index showed there was a total annualised return of 13.9% for the year-ending March 2016.

This was up on the 12.5% return to December 2015 and on the ten-year average return of 9.9%.

When broken down, annualised returns for retail increased to 14.3%, office to 11.3% and industrial to 5.8%.

Property Council chief executive Connal Townsend said the returns demonstrate a booming commercial property market which is delivering strong returns steadily.

The commercial property industry has a critical role to play as a contributor to regional and national economies and should be supported, he said.

“It builds cities and towns by creating civic centres, educational institutions, commercial hubs and social amenities. It is crucial to the growth of regional New Zealand and meeting the needs of our high growth areas.”

The Property Council’s quarterly results follow hot on the heels of Colliers International’s latest Capital Market Report.

The Colliers report also provided evidence of the strength of the country’s commercial property market.

It showed that last year was the second highest year on record for commercial property sales – with a total of $7.3 billion.

This was driven by an extremely buoyant market generated by local buyer activity.

Colliers researcher Chris Dibble is predicting that the commercial property market will stay strong.

“The voracious appetite of buyers for property across all price ranges means we forecast this year is likely to supersede last year - with a total value of sales close to $8 billion.”

But New Zealand is far from the risks of an overheated or euphoric market, he said.

“In fact, the report indicates that the very strong commercial property market is about to enter a new pattern of activity as opposed to approaching a peak.”

Dibble said they have identified 10 reasons why an extended pattern of buoyant investment activity is likely to continue.

These range from well-defined global risks, limited political risks and Reserve Bank monitoring to fundamentals-justified sales activity, modestly appreciating asset values and higher yields.

For those interested in pinpointing locations to invest, the report showed that Auckland, followed by Wellington and Christchurch, remains the biggest driver of activity in the commercial property sector.

However, more sales activity should be expected outside of the three main centres in the coming years, Dibble said.

“Hamilton and Tauranga in the North Island and Queenstown and Dunedin in the South Island continue to be regional hotspots.”

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

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