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Commercial property specialists Colliers International are calling changing times in the sector, but earthquake-strengthening requirements and flat business demand are influencing many investors to take a wait-and-see attitude.
Colliers national director of research and consulting Alan McMahon said opportunities were beginning to appear for investors, with low interest rates and banks again showing interest, but business demand remained flat.
Mr McMahon was in Dunedin to address the members of the fledgling Otago chapter of the New Zealand Property Council, which has just been formedwith a group of 20 founding members, spread over the Dunedin and Queenstown areas.
Before addressing about 40 Property Council guests last night, Mr McMahon said in an interview some the "key" elements at present are areas with population growth potential, which could drive demand for new properties.
"Otago has mid-range population growth expectations across the country," Mr McMahon said.
Mr McMahon removed Christchurch from the national equation, because of its large-scale rebuilding, and said Wellington was at the moment bearing the brunt of the effects of local body earthquake assessments.
Similarly, some issues being faced in Dunedin included the large number of pre-1936 buildings which required earthquake reports, which could then cost almost as much per square metre to redevelop as an Auckland property, but with rental returns in some cases almost 50% lower.
"There is a shortage of A-grade premises in Dunedin, but the [financial] numbers just don't stack up," he said.
However, A-grade vacancy rates in Auckland and Wellington were much higher than Dunedin, where they stood at 11.8% to June last year and fell to 8.6% to June this year.
Vacancy rates in Dunedin's B-grade and C-grade buildings had leapt during that period, up respectively about 9% to 11% and 15% to 23%, as businesses moved into better premises.
For commercial property sales under $2 million, both nationally and in Dunedin, sales had plunged markedly from highs in 2003, with this full-year's results near lows not seen since the late 1980s.