Growing demand and surging prices are driving the commercial property sector as much as the residential market.
A commercial property for lease in Auckland in 2020. File photo Photo: RNZ / Dan Cook
Commercial real estate company Colliers said industrial property, large format standalone retail, prime regional shopping centres and flagship office buildings continued to be in high demand.
The strong demand was already reflected in the value of some of New Zealand's largest property companies.
The Goodman Property Trust has just reported a second half gain of about $415 million or 12.5 percent in the value of its portfolio, on top of the $140m gain in the first half.
Goodman chief executive John Dakin said: "We continue to see strong demand for space, tight supply conditions, low vacancy and solid underlying rental growth across our portfolio. This, combined with relatively low interest rates, has fuelled investor demand, particularly for high-quality logistics and warehouse property."
Colliers head of research Chris Dibble said a notable weak spot in the commercial market was standalone retail strip malls and small main street shops, which were struggling to find tenants.
"The wrong fundamentals are in place, so there's not necessarily a significant amount of pedestrian foot traffic period occurring at the moment," Dibble said.
There was also some uncertainty affecting commercial office space, with more people working from home, although that was expected to settle down with the rollout of the Covid-19 vaccine, he said.
"One thing that's been quite interesting is the demand for land.
"We've seen this in Auckland quite strongly really over the last six to nine months and it's been across industrial land and residential land development activity."
Commercial investment in residential developments was in line with overall demand for houses and apartments, particularly in Auckland, Dibble said.
Meanwhile, lull in international investment activity was making it easier for domestic investors to buy property.
"Offshore purchasing activity especially for flagship office assets was really strong pre-Covid."
Overseas investor interest in New Zealand commercial property remained strong despite closed borders, Dibble said.
"When these borders are opened up again there's going to be a significant amount of offshore money coming into the market and potentially even more than there was before because New Zealand really is regarded as quite a safe haven."