Bidders fight to secure properties

A total of 23 of 28 commercial and industrial properties in Bayleys’ latest Total Property portfolio put up for auction in Auckland and Wellington have sold – with most investment  offerings selling at yields of under 6%. 

Twenty of the sales were at the Auckland auction, with a significant number fetching around $3 million or over, which contributed to a total sales value in excess of $43 million.  Bayleys’ national director commercial John Church says this is a record total for this time of year.  

He says a feature of the auction was the strong competition from multiple bidders on most of the properties. 

The highest sale price was $5,212,000 for an 1100sq m fully leased two-level building, with ground floor retail and office above, on a prime 764sq m corner site a block away from the beach, at 8-12 Clyde Rd in the Browns Bay town centre. 

There were multiple bidders competing for the property initially but in the end one of the tenants fought it out with a wealthy private investor to secure the property, which helped drive the yield down to 5.1%. 

However, the lowest yield of the day was 4.3%, achieved for a shop located in a strip retail block also near the waterfront at 29 St Heliers Bay Rd, St Heliers which was sold for $3,190,000. Comprising a 198sq m food mart and Lotto outlet plus 68sq m of office and storage on a 301sq m site, the property has a 12-year lease from May 2007.

This followed the recent non-auction sale by Bayleys’ Auckland-based international division of a block of shops further along Tamaki Drive in Mission Bay for $9,500,000 at a 5% yield to a Hong Kong buyer. 

John Church says retail properties in prime Auckland waterfront locations are tightly held and keenly sought after.  

Tightening yields
He says the traditional yield margin that higher-value retail properties had over those valued under $2 million has now all but disappeared in the current buoyant market where there is strong competition for properties across all value ranges. All but three of the investment sales at the Auckland Total Property auction  were concluded within a 4-6% yield band. 

“Tightening yields have continued to be a feature of the market this year driven by low interest rates and the depth of the underlying demand for commercial property. There are no signs of the current very strong market easing, which means vendors are achieving very good prices,” Mr Church says. 

Other investment offerings to sell at the Bayleys Auckland Total Property auction included: 

A childcare centre at 115 Boundary Road, Blockhouse Bay sold for $3,090,000 at a 5.5% yield on a seven-year lease from August 2015. 

A 2450sq m warehouse and office building on a 4375sq m site at 43 Ben Lomond Crescent, Pakuranga, occupied by boat builder Rayglass for 20 years, sold for $3,330,000 at a 6.5% yield. 

The former Epsom Post Office, refurbished into professional office suites, on a 789sq m mixed use zoned corner site at 311 Manukau Rd, Epsom sold for $3,025,000 at a 5.3% yield.

An 1845sq m warehouse and office building on 3827sq m at 107 Neilson St, Onehunga sold for $2,800,000 at a 4.7% yield. It has a ground level lease to NZ Opera, which uses it for rehearsals and building stage sets. The opera company’s lease has a final expiry of March 2017 and the 348sq m first level office area is vacant. 

Some 2835sq m of land at 6 Croftfield Lane, Wairau Valley, leased as yard space until 2020 by an adjoining PlaceMakers store, sold for $1,875,000 at a 5.4% yield. 

A 477sq m refurbished building at 76 Victoria St, Dargaville, leased to Westpac Bank until 2020, sold for $1,125,000 at a 7% yield.

A 307sq m medium stud warehouse at 35A Normanby Rd, Mt Eden, with a new six-year lease to an electrical business sold for $884,000 at a 5.65% yield.

All three properties put up for auction in Wellington sold. A yield of 6.1% was recorded on a Newtown property, a 431sq m two-level warehouse, showroom and office building at 3 Myrtle Crescent which went for $635,000. The property is fully leased for three years until February 2018 but with no right of renewal. 

Sales agent Grant Young says strong bidding competition between an investor and the eventual buyer, a future owner occupier looking to convert the upper level to residential, contributed to what was a low yield for Wellington. 

A number of vacant and semi-vacant buildings also sold at the Total Property auctions including another waterfront property, in Whitianga. The two-level building on an 868sq m  site at 20 The Esplanade, Whitianga,  sold with vacant possession for $1,900,000.  It comprises a 240sq m ground floor restaurant/café licensed for 120 patrons plus a 270sq m four-bedroom apartment above.

Neil Prentice writes for Bayleys Real Estate