Commercial property seen as the ‘bow wave’ indicator for regional NZ
Planning for the construction of high-value commercial and industrial property projects is underpinning much of regional New Zealand’s commercial real estate market, according to latest research by ANZ.
The bank’s latest Regional Trends research report identifies that five of the country’s regions recorded a rise in economic activity in the quarter ending June 31, while nine regional economies registered a decline.
The report identified that commercial property building consents, as a fundamental part of any growth being planned by businesses, was particularly strong across the board in Auckland and Canterbury but was largely single project-led in several of the regions.
Bayleys Real Estate national commercial director John Church said commercial property developments in Auckland – as the country’s economic powerhouse – and Christchurch – driven by the rebuild – had been widely acknowledged as stand-out performers in the country’s commercial and industrial real estate sector for most of the past year.
“In both Auckland and Christchurch, for different reasons obviously, we have seen a veritable building boom over the past three years – with large numbers of new commercial premises in particular being constructed,” Mr Church said.
“By comparison, commercial and industrial property activity in many of the provinces appears to be largely riding on the back of the prosperity emanating from the dairying sector – with new milk processing and dairy product plants emerging in the likes of the Waikato, Manawatu and Southland.
“While milk solid prices have generally trended lower this year, the long-term construction planning being undertaken in the establishment of dairy processing plants and infrastructure, strongly indicates a robust long-term future for the sector.
“Conversely, retailing seems to be struggling in the provinces as today’s consumer society moves from the traditional ‘main street’ format toward hubs and precincts.
“This has driven a ‘swings and roundabouts’ type scenario for the retailing sub-set of the commercial property sector – with the owners of CBD premises having to work together with their councils to look at reinvigorating those areas, while we have seen the emergence, and now prevalence, of suburban retailing hubs on the outskirts of towns.”
Mr Church said the ANZ research highlighted the pace of that retailing shift and the amount of new build commercial premises was “patchy” across the regions. The ANZ Regional Trends analysis details commercial property activity trends in New Zealand activity as:
- Northland: The number of commercial building consents lifted 9%. However, the value of consents has come off the boil over recent months – in contrast to a nationwide lift.
- Auckland: Demand for commercial property remained solid – with reports of a shortage of quality properties on the North Shore and low vacancy rates pushing up rental yields.
- Waikato: Commercial building permits fell 26% by value and 7% by volume.
- Bay of Plenty: Commercial consent issuance retraced from a 12-month high.
- Gisborne: The volume of commercial consent issuance dropped 38% between March and June. The value of commercial building permit issuance was up but was about half of its historical average.
- Hawke’s Bay: Both residential and commercial building permits weakened. The number of commercial consents fell 14%.
- Taranaki: Commercial consents were not as strong – falling 12% by volume but remaining 14% ahead of a year ago.
- Manawatu/Wanganui: The volume of commercial building permits eased 7.4% over the June quarter. However, a high-valued project (construction of a new dairy factory in Pahiatua) pushed up the value of commercial building permits issued.
- Wellington: The number of commercial building permits issued was unchanged in the June quarter but has dropped 14% compared to a year ago. The drop in the value of permits was more pronounced – falling 41% from a year ago.
- Nelson/Marlborough: The value of commercial build consents eased to its lowest level since 2006. However, the number of commercial consents was more robust – lifting 4% in the June quarter.
- Canterbury: The region has posted its 13th consecutive quarterly rise in economic activity – with year-on-year economic growth at 4.8%.
- Otago: The number of commercial construction consents rose 16% to reach an 18-month high. The value of commercial building permits was even stronger – lifting 29% in the last three months. News of an upgrade to Otago University (expanding its campus to the tune of several hundred million dollars) provided a boost to local sentiment.
- Southland: The number of commercial consents recorded a minor decrease. However, a high-valued project (a new dairy factory) pushed up the growth in consent values to the highest level since 2009.