New Zealand’s commercial property remains weak

WELLINGTON, Aug. 27 (Xinhua) — A new report released on Tuesday said the commercial property market in New Zealand remains soft due to high interest rates, increased remote working and a continued rise in online shopping.
Commercial properties, including office, retail, and industrial spaces, are vital for economic activity, according to the Reserve Bank of New Zealand’s (RBNZ) financial stability report.
“Weak tenant demand in parts of the commercial property market has led to higher vacancy rates and soft rental growth over the past couple of years,” said RBNZ Director of Financial Stability Assessment & Strategy Kerry Watt.
This situation was exacerbated by high interest rates which have strained owners’ cashflows and reduced property values, Watt said.
The performance of the commercial property sector has been sensitive to the economic cycle. The sector can amplify financial sector impacts in economic downturns, the report said.
However, Watt said the financial system is well placed to manage the risks with a system of enhanced resilience backed by strengthened regulatory requirements and improvements in lending standards.
He warned that a downturn in the sector could impact construction and employment and increase loan defaults, putting additional pressure on banks, which should stay vigilant and continue monitoring developments in the commercial property market. ■