Posted on Jan 31, 2014
Life would be much easier if we could predict the future. But we can't. All we can do is make some educated guesses as to what may lie ahead based on the facts that we do know.
So what do we know about the industrial property market in South Auckland?
1) It is very difficult to make the numbers work for new construction. Therefore we are likely to see little new building. And what new building we do see will have to have rental expectations far in excess of many current rentals to make it pay.
2) Tenants expectations of quality are rising all the time.There will always be tenants who will put up with buildings with fitouts reminiscent of Dickensian times - if the price is right - but most don't want to spend their working hours in dumps.
3) Tenants and purchasers are driven by confidence more than reality. So as long as the media continue to talk up the prospects for the New Zealand economy, the rental and sales market will be buoyant.
4) The flow-on from the impact of the Christchurch earthquakes continues. IEP's are being used for a purpose they were never designed for by banks and insurance companies and that is creating a disparity in value between older and newer buildings.
5) Interest rates always impact on decisions of small business as to whether to rent or buy. Interest rates will rise during 2014, but there is always a lag between rates changing and the impact being felt. Accordingly we may not see any effect this calendar year.
WHAT ARE MY PREDICTIONS FOR THE YEAR?
Barring the unforeseen - and there always seems to be an unforeseen (Asian currency crisis, GFC, Christchurch earthquake etc) - then 2014 will be a year of rising rentals (see #1 - higher rentals for new buildings will drag rentals for existing buildings up).
2014 will also see an increasing differential in value between quality and trash. Higher studs, better amenities, more parking, better street appeal and location will all come to the fore in perceived value.
And as for the rest - more of the same buoyance and optimism that we saw in the second half of 2013.
Happy New Year!
