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New Zealand Research Report | December 2018 | Colliers International Research1
December 2018
14 Predictions for 2019
For the last monthly report of each year we provide
our top predictions for the following year. We have 14
rather than 10 predictions now due to growth in
Colliers International’s business lines. In no particular
order:
All sectors
1. Total annual sales value of commercial office,
retail and industrial property in 2019 will fall just
shy of the forecast $10 billion year of 2018. This
is due to additional legislative compliance and
potential tax changes in 2019 that will add
complexity, costs and time delays to the sales
process. Approximately 85% of the properties
that will sell in 2019 will have an asset value of
$2m or under and be highly sought after by
investors and owner-occupiers.
2. Numerous opportunities in the prop-tech space
will emerge with the release of 5G-ready
smartphones in 2019. Both landlords and
occupiers stand to benefit from the advances in
technologies that 5G unlocks. New Zealand will
be geared up but waiting in anticipation as our
5G mobile network is only expected to be
available in late 2020 at the earliest.
Office
3. The flexible workspace sector will forge ahead on
its own growth path in 2019, undergoing a period
of maturity in New Zealand. Landlords that focus
on more traditional fixed-term leasing will try to
diminish the disruption from the sector by
embracing flexible workspace initiatives like
tenant events and seminars, technology-based
building and operating solutions and customer-
centricity supported by community managers.
4. High-value office assets will receive strong
interest from offshore purchasers that entered
the New Zealand market in 2018 looking to
expand their presence, but they will face stiff
competition from new offshore entrants and
locals spurred on by strong levels of tenant
demand, rising rents and low interest rates.
Industrial
5. Industrial precincts across New Zealand will
experience an increase in occupier demand that
will require a new wave of development activity in
2019. This will lead to one of the biggest years of
uncommitted industrial developments
commencing. This will prove fruitful.
6. As local economies grow, and the Government’s
Provincial Growth Fund takes shape, the golden
triangle of distribution and logistics activity
between Auckland, Hamilton and Tauranga will
become an elongated parallelogram reaching
further north into Whangarei, south into
Palmerston North and east into Hawke’s Bay.
Retail
7. Physical retail stores capture almost 90% of
worldwide retail sales, according to eMarketer,
but it will be a challenging year ahead for many
retailers as online and offline competition mounts
and discretionary spending becomes more
selective in 2019. This will see a re-rating of retail
asset values in 2019 with those likely to
experience uplifts being the owners of assets
with supportive demographic catchments, not
overly weighted towards clothing and fashion and
those transitioning into more experiential,
entertainment and food and beverage offers.
8. Big name offshore retailers that have been
waiting in the wings will dip their toes in the New
Zealand market in 2019 with the opening of new
retail centres at Precinct Properties’ Commercial
Bay and Scentre Group’s new 277 Westfield
Newmarket centre in Auckland. It’s hard not to
expect the likes of Uniqlo, Muji, Apple and others
finally setting up stores in these flagship centres
and expanding our international retailer
presence, but will 2019 be the year we get our
first top-10 global retailer – Amazon?
New Zealand Research Report | December 2018 | Colliers International ResearchNew Zealand Research Report | December 2018 | Colliers International Research
New Zealand Key Economic Indicators – December 2018
Jun-18
(yr rate)
Jun-18
(qtr rate)
Mar-18
(qtr rate)
Q-o-Q
Change
Jun-17
(yr rate)
Y-o-Y
Change 2019F* 2020F* 2021F*
GDP Growth 2.8% 1.0% 0.5% 0.4% 2.8% 0.1% 2.9% 2.9% 3.0%
Current Account (% of GDP) -3.3% NA NA NA -2.6% -0.7% -3.5% -4.0% -4.3%
Sep-18
(yr rate)
Sep-18
(qtr rate)
Jun-18
(qtr rate)
Q-o-Q
Change
Sep-17
(yr rate)
Y-o-Y
Change 2019F* 2020F* 2021F*
CPI Inflation 1.9% 0.9% 0.4% 0.5% 1.9% 0.0% 1.8% 1.9% 2.0%
Net Migration Gain (000's) 63 14 15 0 71 -8 55 40 33
Retail Sales (ex-auto) 3.5% 0.3% 1.4% -1.1% 6.4% -2.9% 3.6% 4.3% 4.8%
Unemployment Rate 4.3% 3.9% 4.4% -0.5% 4.9% -0.6% 4.0% 4.0% 4.1%
Ocr-18
(yr rate)
Sep-18
(yr rate)
M-o-M
Change
Oct-17
(yr rate)
Y-o-Y
Change
10 Year
Average2019F* 2020F* 2021F*
Tourist Numbers Growth 4.5% 2.0% 4.3% 4.1% 0.4% 5.4% 4.5% 4.0% 4.7%
Official Cash Rate 1.75% 1.75% 0 bps 1.8% 0 bps 2.42% 1.75% 2.00% 2.50%
90 Day Bank Bill Rate 1.9% 1.9% -1 bps 1.9% -5 bps 2.6% 1.9% 2.1% 2.5%
10 Year Government Bond 2.6% 2.6% 2 bps 3.0% -35 bps 3.8% 3.1% 3.3% 3.5%
Floating Mortgage Rate 0.0% 5.9% -585 bps 5.8% -584 bps 6.1% 5.8% 5.9% 6.3%
3 Year Fixed Housing Rate 0.0% 5.1% -509 bps 5.3% -532 bps 6.2% NA NA NA
Consumer Confidence 115 118 -2% 126 -9% 120 NA NA NA
Source: NZIER, Colliers International Research *March year forecast
2
Housing
9. Residential prices in regional centres outside of
Auckland that have low unemployment and
housing supply shortages will experience further
price inflation, while Auckland will undergo an
extended period of consolidation. This will have
ripple effects throughout the development
industry. A levelling off in sales prices and rates of
sale with stubbornly high development costs will
lead to a cyclical high in deferred and abandoned
projects. This will counterproductively reduce
future supply that is needed to unlock more
affordable prices. While KiwiBuild will underwrite
certain projects and enable supply, it’s not a long-
term silver-bullet solution.
10. High house prices, positive attitudinal shifts
towards renting and rising legislative and tax
requirements on the ‘mum-and-dad’ Private
Residential Sector (PRS) in 2019 will result in
more companies entering the housing investment
market. Following on from positive offshore
experiences, this will drive purpose-built projects
for long-term renting (known as Build-to-Rent or
BTR) as well as investment vehicles and funds
undertaking large scale investments of residential
projects for Invest-to-Rent (IVR) products. While
there are only a handful of these projects
currently, the number will more than double in
2019.
Rural & Agribusiness
11. Succession planning will be the number one
influence on the rural and agribusiness sector in
2019, bringing with it a number of selling and
purchasing opportunities. The value of land
holdings and the work required are viewed
differently than in the past and now is looking like
a good opportunity to reap some of the benefits.
12. The dairy sector will step out of the limelight in
2019 as it enters a challenging period in terms of
land values challenged by higher production costs
and lower dairy payouts. Sheep and beef farming
confidence will remain strong in 2019 due to solid
export earnings driven by an accommodative
exchange rate and growing global demand.
Positivity in the Horticultural and Viticultural
sectors will take another step up in what is
already being described as a bumper year.
Finding available land in areas with the right
growing conditions will be an issue that could see
land prices rise further.
Hotels
13. New Zealand’s tourism sector continues its
strongest ever growth cycle. International visitor
arrivals will surpass the 4 million milestone by the
end of 2019. This surge in visitation numbers,
coupled with relatively low levels of new supply
entering the market, will drive record performance
for hotel assets.
14. Hotel transactional activity is anticipated to
increase in 2019 as investors take advantage of
the last five years of strong trading conditions.
Further new hotel development activity is likely to
be announced, particularly in the tourism hotspots
of Auckland & Queenstown.
How well did we do in our predictions for 2018?
Check it out on our New Zealand Research Report
December 2017.
New Zealand Research Report | December 2018 | Colliers International Research
Office
Across the entire Auckland regional office market,
flexible workspace facilities occupy around 1.7% of office
stock. By 2023, we project major flexible workspaces to
account for around 2.7%, but could be more given the
number of smaller operators and new entrants expected
over the next few years as the sector continues to grow.
In 2014, the majority of flexible workspace facilities in
Auckland (by number and square metre) were located in
the CBD. However, this has changed over time with the
majority (by number and square metre) now located
outside of the CBD and by 2023 it will be much the
same.
For more information and a national perspective, we will
be releasing our New Zealand Fixed-Term and Flexible
Workspace Report 2018 soon.
Retail
With Christmas fast approaching, retailers are preparing
for the busiest retail period of the year. Retail NZ
recently undertook a survey asking retailers their
expectations on pricing and target performance and staff
hiring intentions over the festive season.
75% of participants expect to meet or exceed targets and
25% expect not to meet targets. With improved weather
conditions, purchasing of outdoor equipment such as
garden, sport and camping supplies is expected to
increase. Also, due to the festive season a rise in food
and beverage spending is expected.
59% of participants expect prices will stay the same or
fall and 41% expect prices will rise. Some business
owners are facing cost increases which may be passed
onto consumers.
23% of retailers intend on hiring more staff over the busy
season, 59% intend on retaining current levels and 18%
intend on employing fewer staff.
Industrial
The seasonally adjusted BNZ – Business NZ
Performance of Manufacturing Index (PMI) for November
2018 was 53.5 (a PMI reading above 50.0 indicates that
manufacturing is generally expanding; below 50.0 that it
is declining). This was 1.6 points higher than September,
and the highest level of activity since May.
When comparing the BNZ – Business NZ Performance
of Manufacturing Index to J.P. Morgan Global
Manufacturing PMI, it shows New Zealand currently has
one of the highest indices. The list in order is Australia,
USA, New Zealand, Japan, Eurozone, UK and lastly
China.
3
Source: BNZ, Business NZ, J.P. Morgan
Auckland Region Flexible Workspace Stock
Source: Colliers International Research
P = provisional, F = forecast
Retail Rader – The Next Three Months
BNZ – Business NZ Performance of
Manufacturing Index (PMI) & J.P. Morgan Global
Manufacturing PMI
0
10
20
30
40
50
60
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
20
14
20
15
20
16
20
17
20
18
P
20
19
F
20
20
F
20
23
F
Nu
mb
er o
f Facilitie
s
Flo
or
Are
a (
m²)
CBD Metropolitan Number of Auckland Facilities
Source: Retail Radar, Retail NZ
25%
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
Mar
-17
Jun
-17
Sep
-17
Dec
-17
Mar
-18
Jun
-18
Sep
-18
Not Meet Targets Meet or Exceed Targets
59%
41%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
Mar
-17
Jun
-17
Sep
-17
Dec
-17
Mar
-18
Jun
-18
Sep
-18
Prices will Stay the Same or Fall Prices will Rise
2021F
to
2022F
(RHS)
New Zealand Research Report | December 2018 | Colliers International ResearchNew Zealand Research Report | December 2018 | Colliers International Research
Source: Colliers International Research
*Combination of industrial office & warehouse at a ratio of 20:80.
4
Annual Market Indicator Review – Q3 2018
Recent Commercial Property Sales
Alan McMahon
National Director
Strategic Consulting
David White
Director
Strategic Consulting
Chris Farhi
Director
Strategic Consulting
For more information contact:
Chris Dibble
Director
Research & Communications
Elena Christodoulou
Research Analyst
Emily Duncan
Research Analyst
Josh Lee
Research Analyst
Disclaimer: Whilst all care has been taken to provide reasonably accurate information, Colliers International cannot guarantee the validity of all data and
information utilised in preparing this research. Accordingly Colliers International New Zealand Ltd, do not make any representation of warranty, expressed
or implied, as to the accuracy or completeness of the content contained herein and no legal liability is to be assumed or implied with respect thereto.
© All content is Copyright Colliers International New Zealand Ltd 2018, Licensed REAA 2008 and may not be reproduced without expressed permission.
Caity Pask
Senior Analyst
Strategic Consulting
Vernon Sequeira
Analyst
Strategic Consulting
Colliers International
Level 27, SAP
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151 Queen Street
Auckland
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614-616 Great South Road, Greenlane
Auckland | $11,600,000 | 3.1%
Property Sector
Prime Rents
(% Change)
Prime Capital Values
(% Change)Vacancy Rate
12-Months to Sep-18 12-Months to Sep-18 2017 2018
Office Net Face Based on Net Face Overall (June)
Auckland CBD 3.0% 11.1% 5.7% 6.2%
Office Gross Face Based on Gross Face Overall (June)
Wellington CBD 5.9% 9.9% 7.8% 7.7%
Office Net Face Based on Net Face Overall (September)
Auckland Metropolitan 3.1% 8.7% 5.1% 6.7%
Industrial* Net Face Based on Net Face Overall (August)
Auckland 10.5% 17.4% 1.9% 1.7%
Industrial* Gross Face Based on Net Face Overall (November)
Wellington 4.7% 7.1% 2.9% (2016) 2.1% (2017)
Industrial* Net Face Based on Net Face Overall (September)
Christchurch 0.0% 4.2% 1.9% (2016) N/A
Retail Net Face Based on Net Face Overall (June)
Auckland CBD 0.0% 0.0% 3.1% 2.5%
Retail Gross Face Based on Net Face Overall (June)
Wellington CBD 2.5% 4.3% 5.6% 6.8%
1/2 Kitchener Street, Central
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