Strategic purchasers with an eye to the future may have the opportunity to make acquisitions with long-term potential during the second half of the year, Colliers commentators say.
Given the current stage of the commercial property cycle, transaction activity remains subdued compared to the flurries experienced in 2021 and 2022.
High interest rates that have limited people’s access to capital and a gap between the expectations of buyers and sellers have combined to cause a slowdown in the market.
David Burley, Auckland Director of Investment Sales at Colliers, says given many economists are predicting an easing of the Official Cash Rate (OCR) in the next 12 months, now is the time for buyers to explore their options and get ahead of the curve.
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“During the first half of 2024 we have experienced a general improvement of confidence in the market among our buyers,” Burley says.
“With the general acceptance that we have likely reached the top of the interest rate cycle, buyers are returning to the market.
“The inactivity of 2023 has possibly begun to wear on people who are now eager to transact.”
Vendors have the past 18 months of data to examine prices achieved for commercial properties and Burley says this will influence their expectations when presenting assets to market.
“With a more consistent meeting of expectations between purchasers and vendors, we foresee transaction volumes growing as we progress through the year.”
In the first half of 2024, Colliers sold a collection of stand-out properties across central Auckland and the city fringe.
In Remuera, a shopping plaza at 320 Remuera Road that has considerable redevelopment potential sold following a highly competitive campaign, while a tenanted investment with strong underlying land value at 50 Cawley Street in Ellerslie was another prominent transaction.
There have been consistent themes among properties that have sold during the past few months, according to Burley.
“The shopping centre in Remuera has the potential to be repositioned into high-end apartments and there is ongoing demand for that type of product. The suburb of Remuera will always attract interest among buyers given its proximity to the CBD and popular local shopping village.
“The asset in Ellerslie was an excellent example of a strategic acquisition where the buyer will have the opportunity to intensify the usage of the site in the future, but it is currently underpinned by an established occupant on a long-term lease.
“Assets of high quality are ones that continually draw a large pool of buyers. Passive investments that can be acquired for under the $10 million price point hold appeal as cash buyers look for future yields that will eclipse the interest rates offered on term deposits when the OCR inevitably drops in the future.”
Looking ahead to the second half of 2024, Burley says vendors will likely continue to monitor their assets and may look to optimise their portfolio to ensure they retain high-performing holdings.
“Savvy buyers will recognise that now is the time to buy with the market at the lower ebb of the cycle, ahead of a future rebound.”
- Supplied by Colliers
