John Urlich, Barfoot & Thompson Commercial – commercial manager for Barfoot & Thompson, says the natural inclination is to remain enthusiastic about prospects for the commercial property market with 2016 having been another great year.
“And we are enthusiastic. Demand will remain high for good productive property. But it would be remiss not to share that we envisage some change in the liquidity of certain sectors.
“For the first time in some years, rigidities have been introduced into our market. In Auckland, the Unitary Plan has made for a large supply of potential development but it is coming at a time when the cost and availability of finance is becoming increasingly restrained.
“Bank margins are going out and loan to value ratios are being tightened. Building industry capacity remains at near maximum and, as we have already seen, the cost of development is proving prohibitive.
“Vendors have been slow to recognise the change in the environment with many continuing to value their holdings on a residual basis assuming some notional feasibility under the Unitary Plan. From agents to valuers, this will be a challenge for the entire industry this year.”
Urlich says Auckland, as the nation’s major “gateway city”, remains the best bet at a time of inherent risk in most other centres, with more than 400 new jobs forecast to be required weekly.
“City vacancy rates will remain at historic lows and the subsequent case for rental growth remains similarly strong. We recommend more acquisition into our biggest market. Its prospects are simply irrefutable.”