Colliers predicts “new growth phase” for commercial market

The commercial and industrial property sector is poised to bounce back in 2024 after several roller-coaster years – boom conditions in 2021 and 2022, followed by a significant downturn in 2023.

Provisional data from Colliers showed that sales volumes in 2023 were 23% lower than the year before. The value of those sales was $5.21 billion, which was the lowest annual figure in a decade and well below the 10-year average of $9.33 billion.

“The number of commercial and industrial property sales was subdued in 2023, as both vendors and purchasers adopted a cautious approach after a record-breaking couple of years. Uncertainty regarding the level at which interest rates would peak, given the inflationary backdrop, and concerns about a cooling economy, all weighed upon sentiment surrounding the property market,” according to Colliers.

But activity is expected to increase in 2024.

“A number of recent data releases give a strong indication that current interest rate settings are having the impact desired by the Reserve Bank of New Zealand. The economy has slowed, and inflation is easing. Therefore, there is growing confidence that interest rates have now peaked, and the RBNZ will begin an easing cycle in the second half of 2024 or early 2025. Consequently, the property market is likely to enter a new growth phase, with sales activity rebounding from the subdued levels apparent over 2023,” Colliers said. 

“The stabilisation in interest rates and prospects of an easing in monetary policy will result in the removal of some major obstacles that have hampered sales activity over the last year. With both property owners and investors able to value assets with greater confidence, the gap between buyer and seller expectations will reduce. Buyer interest, which in 2023 was generally restricted to safe haven assets, will broaden as investor confidence grows, leading to an increase in sales volume. There will also be less reluctance from property owners to bring significant assets to market.”