In contrast to jittery equity markets, there are no indications the current buoyant commercial and industrial property market is likely to ease off any time soon, according to Bayleys’ national director commercial real estate, John Church.
Commenting in the agency’s latest Total Property magazine which is released today, Mr Church says while real estate agents are frequently criticised for ‘talking the market up,’ the commercial property market itself is currently doing all the talking that’s needed.
“The market is surprising even the most perennially optimistic among us,” says Mr Church.
“The clearance rate and prices achieved in August on properties featured in Bayleys’ mid-year Total Property portfolio were phenomenal and exceeded even our own always high expectations.”
Mr Church says close to 40 properties with a total value of $120 million have sold on the back of the mid-year offerings – one of the best results ever from a Bayleys’ portfolio, and an indication of just how much momentum the market currently has.
“A total of 24 out of 29 auctioned properties in Auckland and Wellington sold at an impressive clearance rate of 82% and at an average sale price of close to $2 million,” says Mr Church.
“There were multiple bidders on most lots and strong competition resulted in some very good prices being achieved with all but three of the Auckland investment sales being concluded within a 4-6% yield band.”
Tightening yields continue to be a feature of the market, driven by historically low lending interest rates, which just keep getting lower. Further, Mr Church says there was little yield differential evident at the auction between lower and higher-value offerings or property types – reflecting the depth of underlying demand for commercial property across all value ranges and all sectors of the market.
“The highest-value property to sell – a fully leased two-level building on a prime corner site in the heart of Browns Bay’s town centre – achieved a 5.1% yield on its $5.212 million sale price.
“The lowest yield of the day was 4.3% for a shop located in a strip retail block also near the waterfront in St Heliers Bay Road, which also came with a reasonably hefty price tag of $3.2 million.”
Low yields were the order of the day at the Auckland auction with other sales including:
- the former Epsom Post Office, refurbished into professional office suites, on a mixed use zoned corner site, sold for $3.025 million at a 5.3% yield;
- an industrial building in Neilson St, Onehunga sold for $2.8 million at a 4.7% yield on its ground level lease to NZ Opera;
- 2835m2 of Wairau Valley land, leased as yard space until 2020 by an adjoining PlaceMakers store, sold for $1.875 million at a 5.4% yield;
- a childcare centre in Blockhouse Bay sold for $3.09 million at a 5.5% yield on a new seven-year lease;
- a 307m2 warehouse in Normanby Road, Mt Eden, with a new six-year lease, sold for $884,000 at a 5.65% yield;
- An industrial building in Ben Lomond Crescent, Pakuranga, occupied by boat builder Rayglass, sold for $3.33 million at a 6.5% yield; and
- A refurbished building in central Dargaville leased to Westpac Bank until 2020 sold for $1.125 million at a 7% yield.
All three properties put up for auction in Wellington sold – giving Bayleys Capital Commercial a near perfect auction clearance rate of 15 sold out of 16 offered so far this year – a clear indication the Wellington market is continuing to gather a good head of steam.
“About $70 million of non auction sales have so far also been concluded from the Total Property portfolio in Auckland, the Bay of Plenty, Wellington and Christchurch,” says Mr Church.
“The largest of these was the X Gallery, a meticulously refurbished Auckland CBD heritage building fully leased to 12 tenants and generating annual income of around $1.7 million, which sold for a confidential sum.”
Other significant sales included:
- A 1032m2 site in Beach Road, in Auckland’s CBD, sold for $6.8 million to a developer at $6589 a square metre.
- Four central Auckland properties zoned Mixed Use under the Proposed Auckland Unitary Plan, which will permit more intensive development to varying degrees, sold to separate purchasers at a total value of $11.678 million.
- Two dwellings, including Mollies’ boutique hotel on a 2905m2 site at 6 Tweed Street, Herne Bay sold for $9.5 million (pictured).
- A 2704m2 bare industrial site in Greenpark Drive, Penrose sold for $1.5 million or $623 a square metre.
- The five-storey Pukaki Centre office building, fully leased to predominantly government tenants in Rotorua’s CBD, sold site unseen for $5 million at an 8.5% yield to an American who has bought a number of high-yielding regional properties through Bayleys.
- A three-level mixed use building featuring retail, café and residential tenancies in Willis St, central Wellington, sold for $3.3 million at a 6.8% yield.
- A modern industrial building in Hornby, Christchurch sold for $3.009 million at a 7% yield with a new nine-year lease.
Mr Church says he would expect the current buoyant market conditions to continue for some time yet, particularly while interest rates remain low.
Browse the latest Total Property magazine here.