Wellington’s commerical property market is expected to improve now interest rates appear to have peaked, Ben Castle, Tommy’s Group CEO, says.
“The Wellington sector has experienced lower transaction volumes so far in 2023, largely due to the impact of rising interest rates.
“As a result, activity in the market has been less active.
“The recent Official Cash Rate announcement, however, signalled more certainty, therefore confidence will start to filter back into the market and activity will pick up.”
He reckons this will happen later this calendar year but says the market still faces challenges.
“Property valuations will need to align with both buyer and vendor expectations as both will anticipate the timing of any downward movement in interest rates.”
Ben says Wellington’s office property lease market remains positive as government and corporate sector demand continues.
“Premium-grade buildings are more sought after as Wellington grapples with seismic regulations.
“These regulations will increase vacancy in certain areas of Wellington CBD and the CBD fringe where building owners are yet to strengthen building sufficiently to attract tenants.
“Conversely, these will lead to lower vacancy in the buildings that have undertaken full seismic refurbishment.”
Ben says Wellington has traditionally been a ‘gross’ lease market.
“However, the increased cost of insurance and rising council rates have triggered a shift to ‘net’ leases being the preferred option.
“The Covid pandemic hangover is evident in the CBD where ‘work from home’ endures, which has lead to an increase of office space being sublet as tenants re prioritise their work environments.
“There are challenges on the commercial market, however, as more clarity emerges on interest rate and inflation movement activity is expected to increase.
“But, subject to affordability and appropriate due diligence, commercial property remains a sound investment.
“The tax deductibility and no capital gains tax implications allow for good return whether the strategy is yield or growth or both.”
Ben points out Tommys Commercial works across all property sectors in the Wellington and Greater Wellington region.
“From retail to industrial, office to land, Tommys Commercial has the expertise to assist.”
