Market View October 2020

For all the prognosis of doom and gloom in the market a few short months ago, the reality is that life goes on. Somewhat differently if you are running an international airline, a cruise operation, or even a café in a tourist hotspot.

But for most in the greater Auckland industrial property market, there are 3 factors shaping our lives:

1. Business goes on
2. Low interest rates are here for some time
3. There is a shortage of stock

In the investment market, the major driver is the forward prognosis for interest rates. For those who are cashed up, any yield over 4% (with the added possibility of capital gain) looks very attractive compared to sub 2% in the bank.

But when we are talking low 4% yields, the quality story very much comes into play – quality property, quality location, quality tenants. We know agents talking up further yield compression, but too often without the qualification that low yields and quality must go hand in hand. Possibly the only area where we see low yields without all the same quality elements is in sub $700k properties. Affordability is as much of an issue here.