KEY POINTS:
The commercial, industrial and retail property sectors are continuing to provide strong returns to investors throughout the country, says Gerald Rundle, manager of Bayleys Research in Bayleys' latest Total Property portfolio.
The retail sector has been the strongest performer over the year ended June 2007, according to the latest performance index of the Property Council of New Zealand, producing a total annual return of 28.69 per cent, from an income yield of 7.89 per cent and capital return of 21.61 per cent.
Rundle says the performance of this sector has been bolstered by New Zealand shopping centres, which over the 12 month period have produced an annual total return of 31.05 per cent, 21.61 per cent of which has come from capital gains.
Bulk retail property produced a total annual return of 22.24 per cent and New Zealand other retail, which includes supermarkets and strip retail, gave a total return on investment of 18.69 per cent.
"Confidence in the retail sector has been shown by a number of institutional investors who have been behind developments like the now completed Sylvia Park and the staged opening of the Westfield Albany shopping centre," says Rundle.
"Smaller investors are also continuing to actively compete for retail properties, with a number of outlets in strong locations and leased to national tenants selling for yields between 6 per cent and 7 per cent at Bayleys' September Total Property auctions."
The New Zealand CBD office sector has come in just under New Zealand retail for the year ended June 2007, recording an annual return of 26.91 per cent, comprising an income return of 8.25 per cent and an annual capital return of 17.35 per cent. The Wellington CBD produced the highest total return for commercial offices, despite a slightly lower yield of 8.12 per cent, at 28.98 per cent.
"These strong returns reflect a market where vacancy rates are at some of the lowest levels recorded over the past 17 years," says Rundle.
Auckland's CBD vacancy rate is down at 9.45 per cent, with the higher quality, prime office space down at 3.9 per cent as at June 2007.
