How is commercial property expected to fare in 2023?

We’re almost halfway through the year and the commercial property market outlook for the rest of the year is looking increasingly positive.

Despite the expected slowdown of activity in the commercial property market due to interest rate hikes, experts predict that by late 2023 business will be back on track with the market expected to experience a sustained level of demand and activity across all sectors.

The current weakness in the economy is broad-based and conditions are already recessionary for manufacturing, retail, trade and accommodation, according to recent Statistics New Zealand data. The central bank and treasury have both forecast the country would enter a shallow recession in the second quarter of 2023.

Annually, GDP is still growing – up 2.4% year on year, and despite the shrinking economy, unemployment remains close to record lows, at about 3.3%. These factors alongside a generally favourable business environment is attracting increasing numbers of domestic and international investors. This trend is expected to continue in the years ahead, further boosting the demand for commercial properties.

The commercial property market is set to benefit from ongoing infrastructure investment and development projects. The government has committed significant resources to infrastructure and transportation upgrades, which will enhance connectivity and accessibility in key cities and regions. This will in turn increase the attractiveness of commercial properties located in these areas, further driving demand and rental yields.

In terms of specific sectors, there are several areas of the commercial property market that are expected to perform particularly well in 2023. These include office properties, which are forecast to experience strong demand and rental growth due to a combination of factors such as increasing demand for flexible workspace options and a growing number of start-ups and small businesses.

Retail properties are also expected to perform well, especially in prime locations with high foot traffic. Trends such as e-commerce and omnichannel retailing are transforming the retail landscape, but physical stores remain essential for many retailers, particularly those focused on experiential shopping. This is creating opportunities for landlords and investors who own quality retail properties in strategic locations.

Finally, the industrial and logistics property sectors are expected to see continued growth and increasing demand, largely driven by e-commerce and supply chain needs. With a growing number of consumers opting for online shopping, businesses are seeking efficient and modern warehousing and logistics facilities to handle their operations. This presents significant opportunities for investors and developers who can provide high-quality industrial and logistics properties.

In summary, the commercial property market in New Zealand is well positioned for growth towards the end of 2023. With favourable economic conditions, ongoing infrastructure investment and development projects, and strong demand across key sectors, investors and landlords can expect to find attractive opportunities in the years ahead.

If now is the right time for you to invest in commercial property, give us a call today to discuss your options.