Global transactions on a new high

Demand for property will remain high in Auckland.

New Zealand is helping push sales figures into the trillions worldwide.

An increase in global commercial and industrial property activity, led by North America and Asian Pacific markets, could push transactions this year over the US$1 trillion ($1.275 trillion) mark for the first time since 2007, according to Bayleys' Cushman & Wakefield.

In its International Investment Atlas 2013, which monitors property investment in 51 countries including New Zealand, Cushman & Wakefield predicts an increase of around 14 per cent in transactions more than US$5 million this year. This will be a step up from a 6 per cent rise in activity last year when transactions reached US$930 billion.

"Last year was a year of uncertainty in the global economy, which impeded decision making and market activity," said Glenn Rufrano, global president and CEO of Cushman & Wakefield. "We anticipate less uncertainty this year. In fact, a change in market confidence and momentum seems to have been confirmed in the first half of 2013 as major global risk factors are seen to be receding - albeit not yet disappearing."

Cushman & Wakefield says the lift in global property transactions this year will be driven by increased property allocations by institutions and high net worth individuals and families, plus more stock.

The New Zealand section of the Atlas, compiled by Bayleys Research, expects more improvement in performance in the commercial and industrial property market this year, particularly for prime property.

"Investment competition is likely to intensify in this sector of the market and further yield compression is expected," says Gerald Rundle, manager of Bayleys Research.

"However, secondary property will remain under pressure, particularly if the space fails to meet acceptable seismic standards.

"In the occupational market, vacancy is declining against a backdrop of low completions and rental incentives are being withdrawn. Demand will continue to be strongest in Auckland, although a lift in activity is expected in Canterbury, driven by the rebuild of Christchurch."

The Asia Pacific region is the largest global property trading block, accounting for 47 per cent of market activity, according to the Atlas.

China continues to be the world's biggest property investment market with transactions of around US$300 billion last year. Eight of the world's 20 largest property investment markets are now in Asia Pacific. Australia is the world's eighth largest country market and is expected to continue to grow as pension allocations there are raised.

The Asia Pacific region is expected to outstrip the global growth average this year. John Stinson, head of capital markets in Asia Pacific for Cushman & Wakefield, says improved macroeconomic conditions, with sustainable growth across the region, will result in a forecast 15 to 20 per cent increase in investment activity.

"Investment demand will increase as faith grows in China's soft landing but demand will also broaden and other markets like Australasia and Japan will be an increasing target for overseas investors while markets such as India and Indonesia are likely to be on the rise."

Cushman & Wakefield says the property market is being forced to reinvent itself, particularly in more mature markets as businesses focus ever more on the bottom line, and property has to be part of that, contributing to a drive for efficiency, productivity gains and cost savings.

"In many cases this translates into a desire to occupy less space but frequently also to occupy different space. Much existing property stock is not fit for purpose in a changing world."

Property still strong

What: New property report: International Investment Atlas 2013
Compiled by: Bayleys' Cushman & Wakefield
Scope: Property investment in 51 countries
New Zealand highlights:
*Market improvement for commercial and industrial property
*Increasing competition for prime stock
*Strongest demand in Auckland
*"Lift" in Christchurch with rebuild