As the year comes to a close, we’re all starting to look towards the new year ahead and wonder what it might hold.
While some things likely won’t reveal themselves until the new year is upon us, we can make a few predictions based on what we do know for certain.
2023 will be an election year, something which has historically been influential across all things social and economic.
On top of that, it’s been asserted that consumer and business confidence now is about the same as it was during the first round of COVID. As a result, discussions around New Zealand heading into a recession have become common.
Based on this, we can start to put a picture together of what 2023 might look like for the commercial property market.
Industrial demand likely to continue
Off the back of multiple lockdowns, the retail sector started shifting towards eCommerece. This meant investing in warehousing to keep up with demand and to store larger-than-normal amounts of stock as a way to combat supply chain issues.
This ‘trading bricks for clicks’ trend will likely continue into 2023, with record numbers of building consents being issued to bring relief to business owners. With such high demand, vacancy rates in this sector are likely to remain low.
However, in an inflationary environment, the risk of rising rent rates makes owner occupation an attractive solution for some, which could underpin investor sales activity.
Premium assets
The commercial property industry also saw a significant rise in demand for premium office spaces as a result of COVID.
While working-from-home flexibilities will likely reduce in 2023, we will see this demand carry over into the new year as organisations battle for new talent. This will further the desire for well-located, high-end office spaces designed to encourage employee engagement and collaboration.
Tenant stability is a must
With a certain level of economic uncertainty as the backdrop of 2023, tenant vacancies will become increasingly more expensive for investors.
While fostering long-term tenants should always be a priority for investors, it will be more necessary than ever in the coming months.
Much of the increase cost for investors will come down to traditional property management fees. The facilitation fees investors are required to pay for tenanting vacant properties on top of their normal monthly property management fees will put increased pressure on investors already losing out on rental income.
In the face of financial instability, investors should start looking at commercial property managers with fixed management fees.
Regulatory compliance
While the difference between residential and commercial property is vast, one can sometimes indicate change for the other.
In late November, the Government announced new rental sector regulations, including regulating property managers. Residential property managers will soon be required to register and undergo training for licensing, and complaints and disciplinary matters will be managed under a new framework.
Currently, commercial property managers are not regulated. However, this new shift in the residential sector could be an indicator of changes to come for commercial property managers.
Choose Azure for 2023
There is certainly a lot to look forward to in 2023. It will undoubtedly be a year of opportunity for commercial property investors. However, to achieve this, preparation is a must.
A key part of this preparation will be aligning yourself with the right commercial property manager.
Azure’s fixed rate pricing structure means investors won’t be penalised for vacant properties, the size of industrial warehouse spaces won’t factor into management costs, and premium assets won’t come at a premium monthly fee.
In addition, the stir of emotions brought on by a looming recession will mean investors need to partner with dynamic property managers (like Azure) who can maintain long-term tenants even when emotions get high.
Our proactive property managers are keeping a close eye on the possibility of upcoming regulation changes, so we can be ready to comply and not let this change cause any disruption to our clients.
To get your assets in the best shape for 2023, get in touch with the team at Azure.