How was 2021 ? – and for 2022 ?


Sharon Zollner, chief economist for ANZ, earlier in the year suggested that an economist’s job in 2020 was to make the weather forecasters look good – and so they did.


We saw the continuation of asset price inflation, driven by low interest rates and the simple supply and demand equation. Uncertainty around Covid lockdowns has remained, which in turn has continued to apply pressure on businesses, particularly within the retail, hospitality, events and tourism sectors.

Industrial land prices went to $500/sqm and then $600/sqm – with a recent auction of 1,000sqm at 48 Foreman Road, Te Rapa seeing $780/sqm achieved due to healthy competition. Industrial vacancy rates hover around 1% and land remains in short supply, with Hamilton City Council having an issue it needs to address promptly. Waikato and Waipa District Councils have similar issues, as business and migration flows into the Waikato continue to see demand out stripping current supply.

Yields for commercial and industrial investment properties have increasingly been below 5%, with lease terms seemingly irrelevant to industrial investors, paying almost anything to get their foot in the door. Quality commercial investments generally remain in the 5%-6% range for all but premium offerings, while unit titles can sometimes provide a value proposition when it comes to seeking a more attractive return.

Commercial owner occupiers continue to seek opportunities, but with vacancy rates generally between 6%-8%, the options remain limited. Industrial owner occupiers increasingly compete for land to develop for their own purpose-built requirements.

The Covid response has unfortunately created uncertainty and the government has done little to assist small and medium enterprises needing to plan to keep afloat. Retail, particularly hospitality and event-based businesses, have struggled through continued lockdowns, restrictions and inconsistent policy decisions. Many I talk to feel beaten up, that those in the Beehive are not listening to their predicaments or understand their situations. Will we see greater certainty through the traffic light system (Covid Protection Framework) ? – one would hope so, but ……

In many ways 2021 was far more disruptive than 2020 – and one would expect that supply chain issues will continue, or possibly deteriorate further, as the rest of the world opens up and chases economic growth.

However, there are some key changes afoot

2022 ?

Interest rates are starting to rise. This will impact on development margins, rental rates tenants pay and put further pressure on those businesses that are struggling

Access to capital will become more difficult, with quantitative easing being reduced. These factors will start to bite, so finance for many will become harder to obtain

We are likely to see a gap open up between yields for blue chip investments and the rest. Assets with risk or uncertainty associated to them will become harder to finance

More property is likely to come to the market, as owner occupiers look to free up capital and investors consider disposing of assets where risk or future capital expenditure is likely to be required

Cash could become king again. We are already seeing vendors preferring to deal with cash and unconditional offers, as opposed to those that may be at a higher level, but with the risk of the deal failing to proceed. Government, corporate and larger organisations generally appear to be better placed to withstand the issues that Covid has brought up. They often have greater resources, capital reserves or access to capital and the extensive networks required when things get tough. Small and medium sized enterprises (SME’s) however are the ones likely to suffer most and are less likely to have the resources to bounce back.

Continued staff shortages are apparent within every sector. This is being exacerbated due to non-vaccinated workers leaving the workforce and the ongoing issue with immigration for skilled migrants into New Zealand – just ask licensed immigration adviser Katy Armstrong of ‘Into NZ’. This along with housing affordability and an increasing number of people reassessing their lives, will see a continued exodus of people and their families from Auckland, to the likes of Hamilton and the Waikato in 2022.

All in all, there are going to be continued issues through 2022, so don’t expect an easy ride – but there will be opportunities for those who have positioned themselves for this.

To everyone, have a good break over Christmas and New Years, enjoy the time with your friends and families – it’s been a turbulent year, so take the time to consider what decisions you need to make in 2022 and then get on with making them happen.


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Mike Neale

Mike is the Managing Director of NAI Harcourts Hamilton

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