Commercial property attracts more investors seeking stable returns
Commercial properties are gaining popularity among individual investors, known colloquially as “mum and dad investors,” due to the appealing returns they offer compared to the residential sector.
This interest aligns with a broader resurgence in the commercial property market, particularly noticeable in prime office and industrial assets where both investor interest and occupier demand are on the rise.
Scott O’Neill (pictured), CEO of Rethink Group, highlighted the shift towards commercial investments as residential markets cool, RNZ reported.
Despite the competition for lucrative deals, the potential for high yields is drawing more interest.
“It’s a pretty tightly held market. There’s been price corrections of up to 25% to 30% in some areas, and that’s creating the value we see now,” O’Neill said, acknowledging the keen interest from numerous investors.
New Zealand’s commercial property market sees robust growth
The commercial property sector, as per the Property Council New Zealand’s 2024 report, is valued at an impressive $350 billion, with projections to climb to $399.5 billion this year.
This sector is anticipated to enjoy a steady growth rate of 3.72% annually through 2029. In stark contrast, residential property has experienced only modest growth.
The Real Estate Institute’s recent data showed a slight 1.7% increase in median house prices, a downturn from previous years, RNZ reported.
Advantages driving commercial investments
Investors are increasingly attracted to the commercial sector for its potential for stable, long-term returns.
The New Zealand State of Commercial Real Estate Leasing Report 2024 emphasised the advantageous lease terms across various sectors. Additional factors such as lower interest rates, tax benefits, and overall strong economic performance further bolster investor confidence.
For Australians, New Zealand’s market presents a familiar and promising opportunity for property investment expansion, RNZ reported.
Emerging hotspots for investment
O'Neill pointed out specific regions where growth is particularly vibrant.
Urban centers and regional hubs like Tauranga, Hamilton, and Dunedin are becoming hotspots due to their high yield potentials coupled with relatively low entry costs, making them attractive options for savvy investors looking to capitalize on market opportunities.
