Fear and panic have a big impact on what we choose to believe. It’s often human nature to think the worst, and create self-fulfilling prophecies.

So in this case how bad is the so called crisis in the financial markets and the economy?

Well there’s no doubt that its going to be tough, but I stop short of comparing this to previous crashes and crises.

Many people are looking back to the late 80s when the fallout from the financial market crash in New Zealand was huge. Today we have a completely different kettle of fish. While on the one side there is gloom and doom about interest rates, tight financial markets and a slowing economy, on the bright side we have a strong labour market, growing population, and we’ve already done the hard yards of restructuring our public service and improving conditions for business. The fundamentals of being in business in New Zealand have changed dramatically since the 1980s. I believe we are far better placed to ride out the storm.

In the commercial property development and leasing game, there’s no doubt it is going to be difficult to get finance and it is going to come at a higher cost. This means yields for property investors will suffer. So these investors will look to rental growth and work to force the issue in lease renewals and rental negotiations. Landlords are not going to be particularly happy or jolly and will try to screw the best deals they can. So it will be critical for commercial tenants to be well represented to resist. It will end up being the old equation of supply versus demand. There will be some failures in commercial property development and vacancies will be popping up, so after a few years of a landlords market, there is a good chance of more balance between landlord and tenant.

It is also timely to look closely at operating expenses, space needs and the impacts of rising fuel costs on property location.

This entry was posted on Friday 4th April 2008 and is filed under Property Leasing. Both comments and pings are currently closed.