17 Nov 2011

Property trust says retail picking up faster than office sector

8:35 am on 17 November 2011

Kiwi Income Property Trust says it's noticing a two-speed economic recovery, with the retail sector picking up faster than the office sector.

The listed company, which owns malls including Auckland's Sylvia Park and Christchurch's Northlands Shopping Centre and office buildings including Auckland's Vero Centre and Wellington's Majestic Centre, made a profit of $1.5 million in the six months to September.

That compares with a $13.7 million profit in the same period a year earlier.

The fall was mainly due to devaluations and the cost of earthquake damage at its properties in Christchurch.

When one-off costs are stripped out, its distributable profit rose 9% to $36 million.

Trust chief executive Chris Gudgeon says its retail assets have performed comparatively well, with Sylvia Park's income rising $700,000 in the last six months alone.

He says there's been a modest lift in retail sales across the board and the outlook is improving.

Mr Gudgeon says forecasts for next year are for solid GDP growth and growth in retail sales.

But he says in the office sector the outlook is flat for the next one or two years and recovery may take a while longer.

Mr Gudgeon says research indicates that Auckland vacancy rates should peak this year and from next year there should be some modest improvement in retail rents, but in Wellington there is still likely to be softness in the market.