Respondents see early stages of a downturn in the commercial property market
Commercial property values are expected to drop in the next 12 months due to the impacts of the COVID-19 crisis, according to a global survey from the Royal Institution of Chartered Surveyors (RICS).
The Q2 2020 RICS Global Commercial Property Monitor predicts that global commercial property values will plummet over the next 12 months and that businesses would reduce the size of their premises.
In New Zealand, survey respondents say that the property market is already showing signs of a downturn, forecasting a 4.5% decline in capital values across office, retail, and industrial commercial property classes in the next 12 months.
“You are looking at what I would call a sharp contraction in rents and capital values over the next year compared to historical standards,” said RICS senior economist for Asia-Pacific Sean Ellison, as reported by Stuff.co.nz.
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Despite the negative forecast, prime industrial property is still expected to perform well, with a 2.2% increase in capital value nationally. In contrast, secondary retail property is expected to drop by 12.3%.
Respondents also predicted that hotel values would drop by 17% in the next 12 months in New Zealand and around 18.5% in Auckland specifically. Meanwhile, headline commercial property rents in the country are expected to drop by 6% next year, with retail rents expected to suffer the most.
Prime retail rents are expected to drop by around 10%, while secondary retail rents – such as suburban and smaller malls and shopping centres – are estimated to drop by around 15%. The latter forecast was conservative, and the drop might be closer to 20%, said Ellison.
