Confidence that mortgage interest rates have peaked is growing, supported by Reserve Bank data and commentary sentiment which indicates an easing of inflationary pressures over the coming 12 months – largely driven by a softening of the job market and consequential cooling of the wider economy.

This is a situation that the Reserve Bank has been striving to achieve with two years of Official Cash Rate increases. Businesses and commercial & industrial property owners seek certainty – regardless of whether that direction is positive or negative – and we clearly have that certainty now, with plenty of reasons to think the trend will continue for the foreseeable future.

While transactional activity in the Canterbury commercial and industrial property markets was subdued in 2023, a stabilisation in yields has led to a clearer valuation of real estate assets.

This has given both vendors and purchasers greater and more accurate data on which to base their pricing decisions. As a consequence, the Bayleys Canterbury Commercial & Industrial sales and leasing team has found that clients who have been transacting, have generally been able to do so in shorter timeframes. We are predicting that this trend will continue throughout 2024.

The Bayleys Canterbury Commercial & Industrial sales and leasing team is also hearing from our investor-orientated client network that value-add opportunities are still very much at the forefront of their ‘shopping lists’ – particularly given the potential they offer to maximise returns by retrofitting existing lower-grade assets, or by converting premises into split tenancy formats servicing different tenancy profiles.

Simultaneously, the stabilisation of construction costs is now giving property developers a higher degree of accuracy in calculating refurbishment costs. As mentioned previously, the markets love certainty.

This trend is particularly relevant for businesses with fewer than six employees, for enterprises that embraced hybrid working models for staff, and for those entities seeking compact and/or minimal storage and warehousing space for business stock. We are seeing more staff moving back into their office environments as the hybrid work-from-home model begins to reacclimatise back to a more traditional workplace – albeit with increased collaboration space in the office.

The industrial property market in Christchurch and its satellite areas continue to perform well – with an overall vacancy rate sitting at just over one percent. While rents remained stable during much of 2023 in the office and retail markets, many premises in the industrial market continued to benefit from rental growth, albeit at lower increase levels than in previous years.

Elsewhere in the market, the retail sector is holding up well in established areas – with big box premises and supermarkets still in demand from buyers with sizeable funding pools. The hospitality sector is ‘doing it hard’ as consumers rein in their discretionary spending, and this is having an impact on food and beverage revenues.

We could well see some of these premises, if vacated by tenant businesses, come to the market this year as owners look to lessen their risk profile holding onto empty sites until the sector recovers.

The Bayleys Canterbury Commercial & Industrial team has access to a substantial library of market information and data and is happy to share this with both owners and potential buyers looking to transact this year. Please get in touch with any of our brokers to discuss how we can assist in delivering you the best knowledge possible to make an informed decision.