Breaking new ground in New Zealand’s Commercial Property Sector

Understanding the challenges in Commercial Real Estate forecasts for the next two years

While we can’t rely on a crystal ball, economists’ consensus is that interest rates will likely drop later this year/early next. As inflation stabilises to the levels desired by the Reserve Bank, it will bring a sigh of relief to many stakeholders.

Additionally, policy changes driven by the current government are expected to instil confidence among developers, ultimately aiding the labour market and reducing vacancy rates as the market adjusts. It’s not a matter of “if” the market rebounds but rather “when.”

Key challenges facing the Commercial Property Market in New Zealand:

1. High Interest Rates and Inflation: High interest rates remain a significant challenge for the Commercial Property Market. The increased borrowing costs have deterred some investors but have opened up opportunities for those with substantial capital or lending capacity. Moreover, high inflation has introduced uncertainty, impacting construction costs, rental rates, and overall economic stability. However, the Reserve Bank’s recent actions indicate that inflation is now under control, and pressure is being applied on them to lower interest rates.

2. Resource Management Reform: The fast-track approvals bill, introduced to Parliament in May, represents a significant shift in the regulatory landscape. This reform, if implemented effectively, aims to streamline the approval process for developments, reducing bureaucratic hurdles and accelerating project timelines. The potential impact of this reform, such as faster project completions and reduced costs, is something all stakeholders should be aware of. While the full impact of this reform is yet to be seen, it promises to provide much-needed relief to developers, fostering a more dynamic and responsive property market.

3. GDP and Immigration: New Zealand’s GDP grew by 0.2% in the year’s first quarter, signalling a gradual recovery from recession. At the same time, the country has recorded a surge in immigration, contributing to population growth. These factors play a crucial role in the Commercial Property Market, as economic growth and a growing population drive demand for commercial spaces.

While the Commercial/Industrial Property Market in New Zealand has faced challenges, the outlook remains cautiously optimistic. As interest rates and inflation come under control and policy reforms take effect, the market is poised for a rebound.

The key to navigating these turbulent times lies in understanding and adapting to the evolving landscape, seizing opportunities, and preparing for the predicted upswing. This adaptability and preparedness will be crucial in the coming months as the market readjusts.

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Property Brokers Commercial property division offer a full spectrum commercial real estate service. Our commercial salespeople come from extensive business backgrounds in many different industries, and they take pride in the expert knowledge they have of the local property markets.

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