With recession tightening its monstrous claws, tough economic conditions are holding back rental growth opportunities in both its retail and office properties, says Kiwi Income Property Trust (KIPT).

It was forwarded by Chris Gudgeon, chief executive of KIPT to the listed property trust's unit holders at the annual meeting that they should expect a subdued market with a lower level of economic and investment activity in the months ahead.

It should be noted that Wellington's Majestic Centre and Unisys House, Auckland's Sylvia Park shopping centre and Vero Centre, plus the PricewaterhouseCoopers Centre in Christchurch area are all included in KIPT's portfolio, which is divided between office and retail property.

Mr. Gudgeon said: "Prospects for rental growth in the retail portfolio are inevitably constrained by current market conditions but the outlook will improve as we move out of recession."

He further continued that analysts largely expected an increase in market-wide vacancy rates; however, also expressed that the manager was working hard with the aim of ensuring vacancies did not rise above their current levels.

Mr. Gudgeon, who approved that efforts to secure tenancy could have a negative effect on lease terms, said that KIPT's portfolio had 98.7 per cent occupancy.

He appeared relaxed about the long-term effect.