NZ PROPERTY INVESTOR - Canterbury’s Simes valuation director Will Blake reckons commercial tenants may be better off leasing rather than owning. His reasoning seems to fly in the face of many other market commentators who say that owner occupiers predominate, particularly for green field industrial developments such as Ngai Tahu’s Sockburn Business Park. So is Blake merely touting for new business? Of course. Even so, he has sound reasons for his view. He says there’s been a substantial increase in the value of commercial industrial properties over the past three or four years and as a result of the relationship between rent and capital or market value of property; rents are at historically low levels.

“A few years ago you might expect to pay a rent equivalent to l0%-l2% of the market value of the property; but these days it is more likely to be around 7%”. Blake says rents have gone up in dollar terms but there has been such a strong rise in market values that rent as a proportion has decreased. “Owning has been a favourable position in recent years, given such strong capital growth, but it might not be this way forever. Astute businesses will work out the best time to be an owner and the best time to ‘release capital’ and become a tenant.

“That said, we suspect some landowners will be unaware of just how valuable their properties are in the current market. There’s strong demand from institutional and private investors, which gives rise to good opportunities for owners to make the most of the recent capital gains,” Blake says.