What is the outlook for the commercial property market? – Newsroom

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Globally and locally there’s uncertainty in the commercial real estate sector. Interest rates and inflation are rising, and organisations are still working out what their offices will look like in a post-Covid world. BNZ’s Phil Bennett ponders seven likely trends for 2023 | Content partnership

1. It’s a cycle

Whatever’s going on in the economy, there’s one thing you can rely on – the property market is cyclical. And Phil Bennett should know. Bennett, now general manager of property finance at BNZ, has more than 40 years’ experience under his belt and is managing a commercial property portfolio worth $10 billion.

“If you think of November 2021 as midnight, we’re now at around 4am, in the dark of early morning. It’s an unpleasant time to be awake. But there’s daylight ahead and property remains a sound investment.”

Some property prices are continuing to fall, Bennett says, and we may have higher interest rates for longer than expected, but he predicts the market will stabilise, to use the clock analogy, once we get to daylight hours.

2. Quality matters

Even when times are tough, people are still going to want quality property, Bennett says, and his view is echoed by global commercial property agency CBRE. The company’s 2022 market outlook found positive occupier demand for good quality space.

Across Auckland, Wellington and Christchurch, ‘net absorption’ (a commercial real-estate term measuring the amount of space tenants physically moved into minus the amount of space tenants physically moved out of during a specific period) of prime space exceeded 50,000sq m in 2021, after contracting by 10,000sq m in 2020, the CBRE research shows.

In fact, there was higher prime real estate absorption in 2021 than the years leading up to the pandemic, CBRE found. Around 75 percent of BNZ’s commercial portfolio are premium grade

The original article can be found here