Argosy Property, the investment group that has added industrial properties to its office and retail sites, lifted first-half earnings 6.2 percent as a lack of space in Auckland's office market drove growth in the company's rental income.

Net distributable income, which strips out changes in the value of property, rose to $24.9 million, or 3.1 cents per share, in the six months ended Sept. 30, from $23.4 million, or 2.95 cents, a year earlier, the Auckland-based company said in a statement.

Rental income rose 11 percent to $48.6 million, led by a 38 percent jump in rent for its portfolio of office buildings, which it said was due to a shortage of prime office space in the country's biggest city.

"The situation of low inflation and low interest rates is becoming the norm, which presents its own challenges for those in the property market," Argosy said.


"We are confident that we have a diverse portfolio of increasing quality that is in a good position to meet any challenges that may come our way."

Argosy has been diversifying its portfolio outside Auckland, buying industrial properties rather than malls and retail investments. In August it bought an office building in Auckland for $42 million.

The board declared a second-quarter dividend of 1.5 cents per share, payable on Dec. 17 with a Dec. 3 record date, and affirmed its intention to pay 6 cents in the year.

"While projections beyond that date are heavily dependent on the market and legislative environment, based on current conditions, it is expected that the dividend will increase in the 2017 financial year," it said.

Argosy's net profit rose to $46.1 million, or 5.74 cents, from $37.6 million, or 4.74 cents, a year earlier, including a $27.6 million gain on the valuation of its property portfolio.

The portfolio, which consists of 67 buildings, was valued at $1.37 billion, as at Sept. 30.

The company's weighted average lease term was 5.39 years as at Sept. 30, down from 5.77 years a year earlier, while the occupancy rate increased to 99.4 percent from 99.1 percent.

Argosy's shares last traded at $1.135, and have increased 5.1 percent this year.