What’s been going on in the commercial property sector lately? General Manager James Bangerter, outlines a few key areas that are impacting the commercial property management industry including Inflation, Insurance premiums, and the weather.
Winter is nearly over thank goodness and with the coming of spring let’s hope we get some good news stories hitting the media. Recently it’s all been about the All Blacks and I guess we’re all hoping things get back to normal on that front. Besides that, there have been other issues in the news which all seem to impact the Commercial Property Sector. Inflation and the cost of living is affecting everyone, insurance costs have gone up, the amount of rain we’ve experienced has hit properties hard, ram raids are a weekly event, COVID is still with us, but the opening of the borders to tourists and students should have a positive impact on the market.
All of these things are impacting Commercial property investment and management, and as usual the biggest impact is costs for both landlords and tenants.
Inflation has crept up to over 7% this quarter and most economists are predicting that it will rise even more for a while yet. We are therefore seeing large Commercial property rent increases which is good news for landlords but not so good for tenants, some of who are still feeling the impact of COVID restrictions and their only defence to this is to raise the price of their products and services fuelling inflation even more.
Our property managers have noticed that insurers are more insistent on properties being valued this year before they quote on renewing premiums. This is due to the increase on building costs and rises in property values and therefore insurance premiums are increasing and impacting budgets. In most cases, along with land rates, the insurance cost is one of the biggest for tenants.
The increase in crime, especially the high occurrence of ram raids, will also be impacting insurance premium costs for both the building insurance (which covers the cost of the structural damage caused) but also the tenant’s contents insurance. Most insurers will recommend bollards to be installed in front of shops and unfortunately this is an expensive exercise.
The winter weather is not helping and it’s not over yet as severe weather hits the supply chain hard putting a delay on delivery of goods. Like many other industries, we are finding it much harder to get repairs and maintenance done as quickly as usual, as contractors can’t get parts as quickly and there are huge impacts on their staff due to COVID and other sicknesses. We haven’t experienced this ‘perfect storm’ before and it adds an extra dimension to property management ensuring essential work gets done as soon as possible.
The rain itself is hitting some commercial properties hard. Some roofs and gutters have not been able to cope with the heavy down pours and we have had a lot more minor and major repairs this season compared to others. The weather has caused damage to a few properties requiring insurance claims and I am sure the amount of claims throughout the commercial sector will also be driving premiums up. The actual repairs are costing landlords considerably as it is a landlord’s responsibility to ensure buildings are water tight.
These are only some of the things adding to the increase in costs associated with commercial properties. Fortunately we are well experienced at navigating our way through such challenges and you can be assured that we will be working hard to minimise your risk. Here’s hoping that spring time and the opening of the borders brings good news for landlords and tenants alike. And most importantly let’s hope the All Blacks start winning more games.
General Manager – Commercial Property
Auckland Property Management
Feel free to contact our Commercial Team via the contact form below.