Pockets of confidence are driving an otherwise quiet commercial property market in Wellington, Ben Castle, Tommy’s Group CEO, says.
As we are well into the winter months and the start of the guesswork surrounding the election in early October, the commercial property market remains somewhat passive.
However, there are pockets of confidence driving activity. Both buyers and sellers, landlords and tenants are managing to complete favourable transactions in the Wellington market.
Ben Castle, CEO of Tommy’s Real Estate, notes that there have been fewer transactions this year compared to last, largely due to rising interest rates, a trend that looks set to continue. At the same time, businesses are actively addressing quality issues with older buildings and modernising to entice people back to the office. “This trend is more obvious for buildings with lower seismic strength and reinforced through local and central government’s mandate for NABERS and Green Star rated buildings,” Castle explains.
“For properties with a perceived inferior offering, landlords and owners are creating higher incentives to maintain both rent level and tenants. This gives tenants more opportunity to negotiate, and with the city-fringe displaying more vacancy, businesses also have more options for their place of work.”
Castle says yields are starting to stabilise now that the Official Cash Rate is thought to have peaked. “This is supported by the recent inflation numbers. However, there is still some uncertainty with the main retail banks. We have seen banks increase their lending rates based on their own costs of funding and the global interest rate levels. Therefore, this will further underpin the lower volume trend as buyers may wait longer to purchase a property.”
Subject to affordability and appropriate due diligence, Castle believes commercial property remains a sound investment. “The tax deductibility and no capital gains tax implications allow for good returns, whether the strategy is yield, growth, or both.”
Tommy’s Commercial operates across all property sectors in the Wellington and Greater Wellington region. “From retail to industrial, office to land, Tommy’s Commercial has the expertise to assist,” Castle assures.
