Industrial adds weight to commercial sector

Latest figures from the Property Council of New Zealand’s investment performance index survey show commercial property investors receiving an average return of 18.66% in the year to December 2005, well above the 14.46% investors earned on average for the previous year and more than double the return from the NZX all ordinaries in the same period. “While income returns have remained steady at 9.28%, it is the continued strong increase in capital value that has driven the total return growth over the last few quarters,” says Mr Townsend. “This is illustrated by the capital returns for each sector, ranging from 5.94% for New Zealand bulk retail to 14.14% for New Zealand industrial,” he says.

The two industrial sectors were the standout performers this quarter, continuing the rapid improvement seen over the last 12 months and knocking the Wellington CBD Office market from the top spot. New Zealand industrial experienced a total return of 24.60% (up from 13.70% in December 2004), with Auckland industrial returning 24.39% (up from 13.26% in December 2004).

While the income returns for both markets have dropped slightly over the last 12 months, the increase in total returns has been driven by a significant increase in capital return over the same period: from 3.12% in December 2004 to 14.14% in December 2005 for New Zealand industrial, and from 2.73% in December 2004 to 13.98% in December 2005 for Auckland industrial.

Wellington CBD office recorded a total return of 21.63% - a slight drop from the record high of 24.60% in September 2005, but an increase from the total return of 20.52% in December 2004. The Auckland CBD office sector continued its recent improvement with a total return of 15.99%, up from 11.86% in December 2004.