The cliché of ‘swings and roundabouts’ aptly sums up the mood and trading conditions of the commercial and industrial property market in Canterbury this year.
Looking back over 2023, our sales team is anecdotally hearing that several planned commercial construction projects in various locations in and around Christchurch have been shelved this year.
Not completely halted, but rather put on hold until the general economic outlook improves, and new valuation pricing can be established.
This would enable the factoring in of higher labour and material costs, and allow for greater funding flexibility and of course, potentially lower mortgage interest rates. In the retail, hospitality, and entertainment sectors, many businesses are reportedly experiencing challenging trading conditions in the face of lower consumer spending off the back of squeezed household budgets. This is due to homeowners (customers) having to commit a higher percentage of their take-home salary to service higher mortgage repayment rates rather than nights out for dinner and a show or adding new clothes to the wardrobe.
That has led to some robust discussions being held between retail, hospitality and entertainment tenants and their landlords – who are often having to weigh up the risk of losing their tenant should lease rate increases be implemented. Consequently, many landlords have chosen to keep lease rates at previous right of renewal levels rather than have empty premises. Some commercial and industrial asset buyers in the province are telling us that with banks now only lending up to 40 percent of an asset’s purchase price. Finding the remaining 60 percent deposit has become more difficult – especially when the value of other property assets within their real estate portfolios have been reassessed compared to two or three years ago when yields were at record highs.
While economists are telling us that general economic growth in the economy will be more subdued over 2024, demand for selected pockets of commercial and industrial real estate assets in Canterbury is being strongly underpinned by record levels of migration, and the benefits those new workers bring to the region.
Office space in the city is tight in the premium and A-grade quality premise categories as tenants move out from lower-rated space. At the same time, many businesses are balancing up demands from employees to retain work-from-home conditions against how much floor space the corporate tenant actually now needs.
For Canterbury’s tourism sector, aviation analysts are predicting that international visitor arrivals will continue to improve throughout 2024, assisted by increased flight capacity, particularly from the USA and Southeast Asia. That’s good news for Christchurch, being the pre-eminent gateway to the Greater South Island.
Over the past month, we have observed a significant upswing in the leasing market across Canterbury – with a remarkable 75 percent of our transactions focusing on lease deals. Despite the anticipation that the new government might stimulate an influx of purchasers, we have seen the Canterbury market maintaining stability. Interestingly, small to medium-sized transactions have continued to progress steadily in both leasing and sales.
The Bayleys Canterbury Commercial and Industrial team continues to perform above expectations and the team has secured the number one leasing position within the Bayleys’ national network over recent months. That reflects how resilient the Canterbury market has been compared to the powerhouse cities of Auckland, Hamilton, Tauranga, and Wellington.
Bayleys Canterbury has concluded the highest number of lease deals across the country for Bayleys. Top of the list is superstar broker, Nick O’Styke, who has taken the number one spot for generating the highest value of fees among individual agents across the entire Bayleys commercial and industrial business nationally.
The Bayleys Canterbury Commercial and Industrial team takes this opportunity to pass on their festive wishes to their clients and customers. If, over the holiday break you’d like to discuss any of the properties featured in this issue of Selection or if you’d just like to discuss the commercial landscape in general, please do not hesitate to get in touch.