As we come to grips with 2010, there are some encouraging signs nationally in terms of where the market is heading mixed with some equally dire predictions about specific sectors of it.
In a recently released research paper by my namesake Alan "McMahon", the research director for Colliers International, there are some worrying signs for the retail sector. As he states, sales have been more or less flat for several months after a prolonged and slow decline in 2007-2008. He notes that there were rental drops at about 16 per cent in Auckland and 8 per cent in Wellington last year.
Again, in the office sector, vacancies are steadily rising; already up to 11.54 per cent in the Auckland CBD and set to climb higher this year with the possibility of new buildings coming on stream.
He estimates that 20,000 workers will be needed to fill the vacancies across the board with 10,000 in the metropolitan areas and 10,000 in the CBD alone.
The vacancy rate is as high as 22.8 per cent in certain areas and this is getting towards the vacancy levels experienced in the early 1990s after the 1987 share market crash. In my experience, the commercial property market never properly recovered from that event until the mid-1990s and I suspect that we are facing a similar sort of time-frame this time around.
On that basis, we will not see a real recovery in our markets for another four or five years.
The anomaly is that, unlike the early 1990s, we are not seeing properties being sold at double digit yields and, indeed, yields are holding firm.
Perhaps this is more an indication of the long-term view now being taken by investors when it comes to their commercial property investments. If so, this can only be a good thing for the market.
Until next time, have a great week.