The office markets in Auckland and Wellington will come under pressure in the coming years as new buildings increase vacancy rates and putting pressure on rents, according to Kiwi Income Property Trust.Chris Gudgeon, chief executive of the manager of the
The office markets in Auckland and Wellington will come under pressure in the coming years as new buildings increase vacancy rates and putting pressure on rents, according to Kiwi Income Property Trust.
Chris Gudgeon, chief executive of the manager of the trust, told the annual unit holder meeting that there would be a significant amount of new office development in the Auckland and Wellington office markets in the next three years.
While these projects were largely pre-committed, surplus space would come to the market as buildings were subsequently vacated.
Current vacancy rates sit at 13.3 percent and 6.1 percent in Auckland and Wellington respectively and are expected to increase over the next two to three years. The vacancy rate within the trust's office portfolio currently sits at just under 5 percent.
Chairman Sean Wareing said that while the trust remained cautious it was projecting a cash distribution for the year ending March 31, 2011 of approximately seven cents per unit, representing an after tax yield of around 7.5 percent per annum for domestic investors at current unit prices.
Unitholders heard that during the last two years the trust had experienced a reduction in portfolio value of 14 percent, which effectively reversed the gains made during the two years prior to that.
"Looking ahead, it is important to note that the movement for the latest six-month period was a reduction of approximately only 0.5 percent of the portfolio value, indicating that property values are stabilising consistent with recent improvements in global economic conditions," Mr Gudgeon said.
The downward movement was largely in the office portfolio where a decline in market rents has been experienced.
Despite a softer rental market the trust has managed to maintain a high occupancy rate across the portfolio, finishing the year at 97 percent occupied.
