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Central-city development sites placed up for sale as apartment intensification continues

Growing building and land-use intensification in central Auckland is set to gather momentum – with a trio of separate apartment development blocks sites being placed on the market for sale.

The trio of ‘brownfield’ locations in the heart of the city all offer new owners the opportunity for either constructing new office blocks or apartment towers. They are located at:

• 50 – 52 Cook Street
• 79 Wakefield Street
• 15 – 17 Liverpool Street.

All three sites are being marketed for sale by individual tender campaigns through Bayleys Auckland, with all three tenders closing on March 12. All three properties are zoned business city centre under the Auckland Council plan – which allows new premises up to 50 metres high to be constructed.

Auckland Council’s broadly-scoped business city centre zoning for buildings aims to sustain the precinct’s commercial, entertainment/leisure, learning, and urban living activities through balanced property investment and development in each of those real estate asset sub-sectors.

“The city centre makes an important contribution to Aucklanders’ sense of identity,” says Auckland Council’s planning advisory collateral.

“In addition to managing the scale of development, the city centre zone manages the quality of building design to ensure new buildings successfully integrate with the city centre’s existing and planned form and public realm to create an attractive and recognisable skyline.”

Bayleys Real Estate’s national director for commercial property, Ryan Johnson, said the council’s business city centre zoning guidelines had a strong proclivity towards developing commercial and residential activities: “enabling a significant and diverse residential population to be established and maintained within a range of living environments and housing sizes as well as enabling the most significant concentration of office activity in Greater Auckland.”

“Additionally, the zoning provides for small scale retail activities to occur. That is something developers are looking to include at ground level on many commercial and residential blocks emerging in the CBD.”

The biggest of the three sites being marketed for sale by Bayleys is at 50 – 52 Cook Street, and consists of 1,732 square metres of vacant land which already has resource consent granted for the construction of a 15-storey apartment tower sustaining up to 174 dwellings, three retail units and 13 car parks.

Bayleys Auckland salespeople Layne Harwood and Paul Dixon said the block consisted of three titles – delivering frontages onto both Cook Street for the main entrance and Nicholas Street for the secondary entrance. It is being sold under instructions from the mortgagee.

“The existing building consent – which lapses in 2021 - allows for a development up to 10,390 square metres in size. Under that configuration the proposed apartment tower could contain 35 square metre studio residences, or one and two-bedroom residential units up to 50 square metres in size,” Mr Harwood said.

“Water views of the inner harbour could be garnered from the upper levels of any tower block to be erected on the site. Additionally, the property has the benefit of being totally vacant – which would enable any new owner to begin construction groundwork almost immediately.

“Adjacent properties consist predominantly of residential and commercial uses in the forms of small retail outlets, office space, hotel and apartment accommodation.”

Meanwhile, the second city property being marketed for sale is the currently under-utilised site at 79 Wakefield Street - comprising 442 square metres of freehold land in the central city’s education precinct.

The inner city’s education precinct runs east from Queen Street over to the North-Western Motorway, and houses properties occupied by the University of Auckland, Auckland University of Technology, Whitireia New Zealand polytechnic, and numerous English language schools.

Bayleys Auckland salespeople James Chan and Oscar Kuang said the Wakefield Street property currently derived split income of approximately $106,160 per annum from a superette operator, combined with rental from eight car parks. The lease to the retail tenant runs through until 2022, while the car parks are on weekly lets.

“With any redevelopment of this site into an accommodation premises, the obvious target market for tenants would be the students attending the multitude of surrounding tertiary education operations,” Mr Chan said.

“With a long-term funnel of students feeding into these institutions, the convenient location of budget-focused accommodation delivers a compelling rational for development along those lines.”

The Wakefield Street property sits across the road from Auckland University’s 10-storey O’Rorke Hall which houses up to 366 first year students in single room units.

Rounding out the trio of development opportunities is the 619 square metre rectangular piece of land with a north-western vista at 15 – 17 Liverpool Street – also within the city’s education precinct.

Bayleys Auckland salespeople James Chan and Oscar Kuang said that just like the Wakefield Street site, the Liverpool Street property would lend itself to the creation of new student accommodation.

“With the property sitting immediately adjacent to existing apartment dwellings in all directions, any development of high-density accommodation units would be consistent with maintaining the area’s residential nature,” Mr Kuang said.

“Underpinning the residential component, there is a plethora of eating, drinking, retail, and entertainment options in the immediate 500 metre walking distance vicinity – stretching from Aotea Square, through the top of Queen Street, and into K’ Road.”

Mr Kuang said the property was deriving holding income from the ad-hoc leasing of 13 car spaces.

Market data compiled by Bayleys’ research shows that commercial premises vacancy levels across Auckland’s central business district and city-fringe precincts sat at 5.4 percent at the end of 2019 – down from 5.6 percent from the same time in 2018. Vacancy rates have now been less than seven percent since mid-2016.

Mr Johnson said that while residential apartment construction in the Auckland CBD and city-fringe locales had been prevalent over the past five to six years, the three city centre venues currently being marketed for sale could alternatively support new office premises.

“A reduction in the number of central Auckland new office building consents issued by Auckland Council for the CBD clearly indicates that the supply of new office space is set to slow from the end of this year,” Mr Johnson said.

“As a consequence, there is little prospect of a significant oversupply of space, as beyond 2021 the development pipeline is set to thin out.”

In the year to June 2019, just 29,000 square metres of new office development was consented. That figure is down from nearly 58,000 square metres from the previous year, and an average of nearly 48,000 square metres per annum over the previous five years.

Bayleys’ market data recorded that commercial premises in Auckland’s CBD generated total returns of 13 percent – encompassing both capital growth and average yield rates - over the 12 months to June 2019. By comparison with previous years, total returns for commercial building space in the city have sat close to 10 percent per annum since early 2013.

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