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.

Three of the four retail categories experienced an increase in total returns over the last 12 months, with only shopping centres showing a slight decrease. The ‘other retail’ category (combined small shopping centres, small bulk retail outlets and strip retail) returned 20.11%, up from 16.80% in December 2004; the bulk retail category recorded a total return of 15.52%, up from 12.39% in December 2004; and the combined retail category returned 15.73%, up from 15.11% in December 2004.

The shopping centre sector returned 15.29% in December 2005, which although showing an increase from the total return of 14.57% in September 2005, was down slightly from the total return of 15.57% experienced in December 2004.

The investment performance index sources information from 18 leading property owners and managers. The figures are based on analysis of 281 properties, valued at more than $5.15 billion and covering over 2.26 million sq m of net lettable area.