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Bay of Plenty commercial property values at peak

Tags: Commercial

Tauranga’s commercial and industrial property markets remain at peak levels after a three-year bull run in capital value growth, according to a leading figure in the real estate sector.

Bayleys Tauranga commercial manager Mark Walton said the region’s industrial, retail, warehousing, and office sectors were now all at record levels - and would remain so well into 2020 at the earliest.

“As part of the ‘Golden Triangle encompassing Auckland and Hamilton, the underlying economy of Tauranga is strong and shows no signs of easing,” Mr Walton said.

“Social infrastructure, including the property sector, is playing ‘catch-up’ with population growth – with projects such as Tauranga Crossing in Tauriko and the Tauranga central business district remodelling and regeneration, including the new Farmers outlet and adjacent real estate, continuing to drip-feed floor space into the market over the coming two years.

“Meanwhile, the horticultural sector – particularly kiwifruit and avocado production – is buoyant after delivering record crop value yields, and subsequently land values are at peak.

“With those higher rural revenues feeding through to bottom lines, we are tracking more interest in pure commercial property from orchardists and farmers sitting on high equity levels with their properties. To add diversity to their portfolios they are looking at investing ‘in town’,” said Mr Walton.

“Commercial property yields are at all-time lows - getting down around the five percent range – such as the sale in the middle of the year of 168 Devonport Road in the city with an Asian supermarket and gymnasium tenancies which changed hands for $2.95 million for a yield of 4.9 percent, or the brokering of the Ridge Plaza multi-tenanted retail complex in Jude Place, Bethlehem, above right, which sold at the end of the year for $3.05 million at 5.1 percent yield.

“Similarly, with the manufacturing and warehousing sectors, where we have seen firms such as Centesi Furniture and NZL Group take on bigger premises to handle their increased activities and operations.

“Likewise in retailing where brands such as Rodd & Gunn and Max have both taken on more floorspace in the bigger and brighter Bayfair Mall.”

Mr Walton said commercial property developers had also been active in the Tauranga real estate market throughout 2018 – ranging from the purchase of 837 square metres of bare land at Tauriko Business Estate, shown below, for $448 per square metre, through to a 2,755 square metre motel and single-level commercial building property in Harrington Street – zoned for urban renewal up to 49 metres high.

Commercial real estate values in Tauranga are at peak levels – from development sites in Tauriko through to investment buildings such as Ridge Plaza in Bethlehem.

“Commercial construction in Tauranga is experiencing unprecedented growth. Of the $337 million of non-residential consents in the 12 months to September, $117million was for retail buildings, $82million was for industrial spaces and $71million was for offices,” he said.

Mr Walton said 2018 was a record year for commercial property sales in Tauranga – with some $194 million being recorded. Within the auction room, Bayleys Tauranga recorded a 73 percent clearance rate on commercial properties over the second half of the year.

“There is a groundswell of sentiment coming through now from a growing number of our clients looking to cash out at the current peak level before the market heads into a period what we believe will be of flatline activity. In other words, this is as good as it’s going to get for a while – so for vendors thinking about cashing up at the top of the market – get out now,” Mr Walton said.

“Assessing the supply and demand equilibrium, there is still significant demand from the investment market – both for new-build stock, and existing income-producing premises with established tenancies on long leases… so there is still an appetite out there for good real estate assets.”

With most buyers and sellers winding down their focus over the Christmas and New Year holiday periods, Mr Walton expected market activity to spark back into action mid-way through February 2019, with a number of new listing campaigns already in the pipeline to be brought to the market.

For more information contact the Bayleys BOP Commercial team or 07 571 4679

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