Strong demand for Industrial leasing continues at a record rate

by James Valentine

At the conclusion of the first quarter of 2023, the commercial property market in Queenstown has maintained a steady level of activity, resulting in strong sales and leasing activity which buck the national market trends. In this article I will cover off some key trends we are seeing in the market, as well as an indication on what we see to come over the course of the year. These predictions are only a few of the many indicators we are seeing from the commercial property activity year-to-date, so for the most accurate and up to date advice, be sure to reach out for further information.

Recovery signs are optimistic

by Glenn Peat, General Manager Ignite Wanaka, Chamber of Commerce

It is very encouraging to see the business levels year to date, with visitor numbers remaining positive. While we are certainly not out to the woods yet, figures to date this year versus 12 months ago are a positive sign. It was pleasing to see the latest business confidence results for New Zealand. The results indicate that businesses across the country are feeling optimistic about the future, which is great news for the economy.

However, it is important to note that there are still some challenges facing businesses in our region. One of the biggest issues is the ongoing accommodation situation in the Queenstown Lakes area. This is a complex issue that has been building for some time, and it is having a significant impact on local businesses.

So far this year…

Across all asset classes, purchase demand has remained strong. Colliers is pleased to be able to report a near 100% success rate for commercial properties taken to market in 2022. The beginning of 2023 has seen a similar response, albeit with transactions taking slightly longer, often being held up with enhanced due diligence being required by lenders as part of property purchases.

Industrial and warehouse stock leasing opportunities remain at a record low rate through Queenstown. Predominantly driven by trades and tourism-related businesses, there is currently no available stock for storage, manufacturing or workshop/warehouse use for lease through Frankton. This is putting upward pressure on rental levels as businesses look to maintain their current presence in this area. Following this trend, we are seeing an increase in enquiry levels on any buildings being sold with vacant possession, as businesses prefer to pay mortgages vs increased rental levels. The CBD has seen strong leasing activity, boosted by a return of interest from major overseas brands. The opening of the O’Connells mall has cemented Queenstown’s image of being a premier tourism destination for overseas visitors.

What is to come?

While Queenstown has been well protected to date from much of the happenings around NZ, we are beginning to see the effect of interest rate increases and a shallower buyer pool of investors seeking return. We are expecting that the “flight to quality” trend will become a stronger factor in buyers’ decision making process as prime or A-Grade stock takes preference over second and third tier property. Closely linked to this is the belief that owner-occupation will become increasingly attractive for businesses –particularly with the latest OCR increase.

On the leasing front, the demand for warehouse/storage space will remain strong as businesses continue to benefit from increased interest in Queenstown from domestic and international markets. Office leasing has been active, particularly in the 150-300sqm range, which is another trend we anticipate to continue as remote/hybrid working becomes more popular. Please free to get in touch if you have any questions on commercial activity happening within your area.

The lack of affordable housing in the area is making it difficult for businesses to attract and retain staff and is also driving up the cost of living for those who do manage to find accommodation. This is putting pressure on wages and is creating a challenging environment for both employers and employees. While there is no easy solution to the accommodation crisis, it is important that we continue to work together to find ways to address the issue. This may involve a range of strategies, such as increasing the supply of affordable housing, encouraging more investment in the region, and exploring innovative solutions to the problem.

The accommodation situation in the Queenstown Lakes region has been a concern for many years, with limited availability and high prices making it difficult for residents to find suitable housing. This problem has been compounded by the growth in tourism over the past 12 months and the demand for short-term rentals such as Airbnb. Many property owners have chosen to convert their homes into tourist accommodations, reducing the supply of long-term rentals and driving up prices.

This has had a significant impact on the local workforce, as many employees are unable to find affordable housing in the area. This has led to a high turnover rate in some businesses, as employees are forced to leave due to the cost of living. This not only affects the businesses themselves but also the wider community, as the loss of jobs and the turnover of employees can have a negative impact on the local economy. Being part of the Mahi Queenstown Lakes Workforce Strategy Steering Group, this issue is at the forefront of our discussions. The Steering group is comprised of representatives from both regional Chambers of Commerce and both RTOs, MSD, MBIE, RSLG along with local economic experts to formulate action plans to counter our workforce challenges including the accommodation concerns at present. The Wanaka Business Chamber is committed to addressing this issue and has been working with local authorities and businesses to find solutions that will benefit both residents and businesses in the region and is working closely with local authorities and community organisations to achieve this goal.

With the right approach, we believe that we can build a stronger, more resilient economy for the future.

Glenn Peat General Manager

Cell 027 257 8708

Email gm@ignitewanaka.co.nz