It is also performing well enough that property syndication is making a come-back after several years of troubled times, according to Anthony Beverley, property manager at AMP Henderson.
Beverley says while the benchmark Top 40 share index produced a 0.7% return in the March quarter and a 7.8% gain for the year ended March, listed property companies managed a 1.3% return in the quarter and a 14% return for the year.
The investment market generally is "flush with cash," and the significant gap between property yields and the interest rates available elsewhere is a key attraction he says.
"There’s a lot of money out there looking for a home. It’s an equity hungry market and a lot of that money has gone into property," Beverley says.
Despite the syndicated property market’s well-publicised difficulties in the past, Beverley says one reason for its recent signs of life is "there’s so little choice."
The industrial property sector is benefiting from the strength of the export sector and producing stable yields in the 9% to 10% range.
Beverley says he’s been surprised at the strength of the retail market, where sales are running about 10% ahead of a year earlier. That kind of growth is feeding through into rental growth and retail property is yielding between 8% and 10%.
Property Council figures show retail property has been the consistent best performing property sector during the last 10 years, he says.
The office property market has also surprised AMP on the upside as it crawls out of its post-Asian crisis slump.
This is most evident in Wellington where prime quality space accounts for about 9% of the office space available, Beverley says. Space which two years ago was renting for $250 a square metre is now fetching between $325 and $350 a square metre, he says.
In Auckland, where prime space accounts for about 25% of the market, the pressures on rentals are much less marked.
The investor market in Wellington is also active. While in some years not a single Wellington office property changes hands, last year there were 17 sold, Beverley says.
AMP Henderson’s own property portfolio produced a 2.4% return in the quarter, the highest return it gained from any asset class. For the year, its property portfolio returned 10.6%, behind the 12.6% return it achieved from its actively managed equities portfolio and the 27.7% return from its recently launched Strategic Equity Growth fund.
By contrast, AMP’s passively managed global equities produced a negative 12.4% return for the year.
