Colliers International principal in Dunedin, Stephen Cairns, said local confidence in the market had swung from -9% during the same quarter a year ago to +10% for the quarter to June.
"It's a dramatically improved picture from the lows of June 2009 when [year-ahead] confidence hit -28%," he said yesterday.
Colliers' monitors about 151,000sq m of commercial office space around Dunedin. At present, 89.5% is let and 10.5% vacant, with a "modest increase" of lettings in A and B grade premises expected during the next year.
Yields from Dunedin's A, B and C grade buildings, assuming freehold status, were respectively, from 8% to 9%, 9%-10% and 10%-11% - slightly up on most average yields in other centres.
Nationally, net prime face rents declined 4% during 2010 but were stabilising. Premium and A Grade rents appeared the most stable.
Anecdotally, there are several commercial developers with large historical buildings around Dunedin who have said they will not be redeveloped until suitable tenants are found.
Nationally, the volume of central business district (CBD) office sales during 2010, valued at over $2 million each, was up almost 20% on the previous year and was up more than 90% on 2008 levels.
The quarterly confidence survey nationally, of 3695 respondents, increased from -3% to 10%, the most optimistic rise since the survey began in December 2008. Most main centres showed improved confidence levels, except Nelson and Wellington, which were down respectively -10% and -1%.
While the results were "skewed by a big jump in sentiment in Auckland", with confidence swinging from -36% in the September quarter to +27% for the June quarter, rental yields were expected to "hold steady" with fewer properties on the market, following two years of Australian funds' divesting themselves of properties.
Mr Cairns said the previous quarter's findings were repeated in June, in that investors in the industrial sector being more optimistic than their commercial and retail counterparts in the main centres, with industrials "leading the commercial property market out of the doldrums".
"New Zealand businesses have generally recovered well since the recession, resulting in increased demand for warehouse space from business tenants with solid fundamentals," Mr Cairns said.
Around Dunedin, leasing inquiries had come mainly from tenants considering relocation; through either business consolidation, upgrading premises or because of pressures from the economic recession.
"While there have been a number of inquiries from Christchurch, the notion of businesses relocating to Dunedin amid fears of more earthquakes has not materialised into any significant leases," Mr Cairns said.
Dunedin rental rates and incentives had been "relatively stable" during the past year, but with few options for tenants to choose from, and no new CBD developments under way, local landlords could expect some growth in rental during the next 12 to 18-months, he said.
The Colliers findings are borne out by anecdotal evidence of other commercial agents around the city who have noted a positive swing in inquiries from Christchurch business owners wanting to relocate south but, in reality, only a few small companies have made the move.
Many are caught up in ongoing insurance claims on buildings and businesses in Christchurch.
Mr Cairns said there had been a "modest pick-up in activity" in Dunedin's central business district during the past year. Most office leasing activity was in the B grade sector.
