I hope you are keeping safe and well as we continue to fight the latest covid outbreak.
On behalf of us at Viranda, below is a quick update on the commercial property market for the last business quarter.
Overall, we feel it is too soon to quote the effects of the latest round of lockdowns. Our team are still transacting deals during the lockdown and on the whole, Viranda has witnessed cautious optimism from our clients, with an attitude of “we’ve been here before, we know what to do…let’s crack on.”
Once again, rent relief negotiations have been handled fairly and with empathy from both landlords and tenants. Thank you for the part you have played in these sensitive discussions and decisions.
Industrial sector 🤩
The industrial sector continues to take everything Covid has thrown at it and come out a clear winner. We are still completing deals for investors despite restrictions and ongoing uncertainty.
The appetite for industrial property is coming from all quarters: investors, business owner occupiers, tenants and developers. Even with the Reserve Bank increasing Interest Rates recently, it is yet to show any impact on this sector.
The latest lockdown has further increased the shortage of industrial properties available for purchase or lease, and has delayed the completion dates of new premises.
Our team are regularly having discussions with investors around timings and whether selling and buying in the same market makes sense right now. Capital gains may be good, but yields are down, so if they were to purchase again their income might be compromised. For others, it’s the perfect time to act quick on the opportunities – quality industrial property is selling fast, so there is very little time to wait.
While industrial has been the most popular commercial asset class in NZ for some time, with strong price rises and resultant lower yields, investors are beginning to consider a wider pool of asset sectors to chase yield, and we are always on the lookout for new opportunities.
But as always – everybody’s situation is unique and the conversation is worth having.
Retail sector 😐
Understandably, retail and hospitality are taking a “wait and see” approach. Banks are looking at retail with a different view – and for many, depending on age and stage, it will not be the right time to purchase.
Office sector 🙂
The office sector has shown little material change in value. The demand for high-quality office space and growing expectations of people returning to offices after lockdown, has resulted in quiet optimism for this sector.
Property Law Act changes afoot:
The proposed changes to the Property Law Act came out of the blue last month and were a bombshell in every sense. Under our Property Council NZ membership, Viranda submitted in opposition to the Government’s quick-fire changes.
If you haven’t kept pace with this, feel free to read more about it under our news section. Essentially, it’s a new clause to be added to leases that don’t already contain a rent abatement clause – taking a “one size fits all” solution across all Commercial Property contracts for handling fair rent proportions (including a requirement to consider a tenant’s loss of income in determining what a ‘fair proportion’ might be). The bill was passed by Parliament on 28 October and will likely come into force shortly. Our team will be in touch directly if we feel you are affected by this change.
New Zealand’s roadmap out of lockdown feels shaky but our clients are forging ahead with their commercial property goals. Delta will not derail us!
Our team are certainly looking forward to regrouping in the office and seeing some you face-to-face soon.
Until then, stay well.