Office sector leads commercial property returns

9:53 AM Tuesday September 2, 2014 Colin Taylor

Auckland office towers at night

Second quarter property index results, released by the Property Council of New Zealand (PCNZ) and Investment Property Databank (IPD), show a total return of 11.1 per cent for the year ending June 2014.

The total return comprised 7.7 per cent income return and 3.1 per cent capital growth with the office sector leading the market with a return of 11.9 per cent.

At 11.1 per cent the New Zealand total return is currently 138 basis points higher than returns across the Tasman Sea. New Zealand real estate has been outperforming the Australian market since September 2012, a trend which continued in the June quarter.

Connal Townsend, chief executive officer at the Property Council says the IPD results this quarter are very gratifying. “They provide the market with a clear, reliable indication that the New Zealand economy in general, and the commercial property sector in particular, remain comfortably in recovery mode.”

True Commercial - Connal Townsend Property Council NZ - cropped.jpg

Connal Townsend, chief executive of the Property Council of New Zealand


Anthony De Francesco, executive director at IPD, concurs stating that the June quarter PCNZ/IPD Index indicates the commercial property investment market remains on the recovery path. “A strengthening in macroeconomic activity, driven by increase in construction activity, solid employment growth and retail sales growth, are indicating a positive economic outlook ahead. These positive factors should, in turn, be reflected in solid property investment returns.”

Performance in the office sector has been supported by a recovering labour market which has helped boost demand for office space in key markets like the Auckland CBD.

According to Statistics New Zealand, the unemployment rate fell to 5.6 per cent in the June quarter, its lowest level since March 2009, and full time employment growth, at 4.6 per cent, was at its highest level in over nine years.

The PCNZ/IPD New Zealand Quarterly Property Index consists of 26 contributing funds with a combined asset value of NZ$12.7 billion held in 578 investments.