Wellington is now a “compelling” investment as its commercial property values and rents continue to rise strongly, according to real estate specialist CBRE.
Most commercial property markets in Australasia may have been cooling off as rental growth plateaus – but not Wellington.
According to CBRE’s Marketview, Wellington Q2 2019, the value of commercial and industrial property in Wellington had risen strongly in the year ending June 2019 – which might have been prompted by demand for office and industrial buildings.
It added that the average value growth for office, industrial, and retail properties in the city reached 7.8% in the 12 months to June this year. Meanwhile, office rents rose 7.4% from last year while industrial rents 8.9%.
Read more: Hamilton's housing is “severely unaffordable”
CBRE explained that Wellington’s sustained low vacancy made it attractive to investors but lack of stock for sale may become an issue.
"While conditions remain favourable for investment, and buyer bidding is elevated, a lack of suitable stock for prospective investors continues to stagnate transaction opportunity," CBRE said.
It predicted more growth in the value of commercial property in Wellington this year and next as well as strong rental performance in the office market – adding that office development is more likely to increase due to lack of supply in the market.
"While there is a robust pipeline of potential development projects, there has not yet been any new build confirmed,” the real estate specialist said.
However, rents might continue to rise due to shortage of supply – with rental rates already rising to 2.5% in the prime market in the past six months while 2% for the secondary office space.