High returns on commercial property

1:33 PM Friday November 7, 2014 Colin Taylor

Industrial assets are performing their best since March 2008

The return on New Zealand commercial property is now at its highest level since the March 2008 quarter, reports the Property Council of New Zealand (PCNZ).

The council’s report says commercial property continues to perform strongly as evidenced by the PCNZ/Investment Property Databank (IPD) New Zealand Property Index results for the quarter ending September 2014.

PCNZ represents New Zealand's office, industrial, retail, property funds and multi-unit residential property owners, investors and managers, while the PCNZ/IPD New Zealand Quarterly Property Index consists of 28 contributing funds with a combined asset value of $12.8 billion held in 577 investments.

“Industrial assets are also at their best since March 2008, returning 12.2 per cent for the year to September,” the report states. “Retail returns are 11.1 per cent up on 9.5 per cent from last quarter, but below their recent peak of 13 per cent in the third quarter of 2012.”

Connal Townsend, chief executive officer at Property Council, says results across all three main commercial property sectors “show a steady performance both in terms of capital growth and income return”.

“The results this quarter should continue to give confidence to New Zealand and international capital markets that the New Zealand commercial property sector is a desirable investment option,” Townsend says. 

The index reveals a total composite return for all classes of 12.9 per cent which is comprised of 7.6 per cent income return and 5 per cent capital growth.

Dr Anthony De Francesco, executive director of IPD Australia and New Zealand says, the strengthening investment return profile reflects a combination of favourable occupancy market fundamentals, underpinned by strong macroeconomic conditions.

“A stronger return profile is likely to be experienced across all commercial property sector markets,” he says. 

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(Above) Industrial assets are performing their best since March 2008