Commercial investors in Queenstown's central business district are accepting lower yields in the expectation of continuing capital gains, a market commentator says.
Colliers Queenstown director Mark Simpson said the average investment yield, or rental income to sale price, had slipped into the 4-5% range, which was about a percentage point lower than in the previous economic cycle.
That was a reflection of CBD property being tightly held, high demand and ``seasoned'' investors being prepared to accept lower investment yields in the expectation of continuing capital growth.
``History tends to repeat itself in Queenstown,'' he said.
The vacancy level for retail space in the CBD was virtually zero. New or revamped space was either being pre-let or let as soon as it was built.
``We're once again in that scenario of high demand and no supply, which is putting upward pressure on rents.''
In the accommodation sector, more development was in the pipeline. Several projects in the CBD and Frankton had either been granted consent or were in the planning process.
With occupancy levels approaching 100% and room rates rising, new builds were looking increasingly viable, Mr Simpson said.
Meanwhile, the Frankton Flats building boom shows no sign of letting up.
Still under way are stage two of the Five Mile shopping centre and a four-storey office building, Remarkables House, next to the Ramada hotel.
Work on a $100million town centre by the Grant Rd entrance to Five Mile is expected soon.
