‘Mega’ sales headline surging commercial market

A 15,000sq m office and retail building at 1-7 The Strand in Takapuna has been bought by a New Zealand-based private investor for $70 million at an 8.4% yield. 

The building was sold by Paul Hain of Bayleys Auckland, in conjunction with Simon Aldridge of Bayleys North Shore Commercial. It was one of a bunch of 10 commercial property sales Bayleys has run in recent times totalling more than a billion dollars.

The building, on a 7862 sq m high profile corner site close to Takapuna Beach, was developed in two stages.  

A five level building opened in mid 1991 as the former North Shore City Council’s administrative headquarters, and an adjoining seven-level building was added in 2009. 

At that time the council signed a 12-year lease over 86% of the net lettable area with the balance being retail space.

Mr Hain says the seller had commissioned engineering reports and preliminary plans to potentially add a further level over part of the original building which would provide approximately 1000sqm of additional accommodation. 

Meanwhile, all four office buildings in Spark’s head office complex in central Auckland have now been sold by Bayleys Real Estate for a total of just under $250 million. 

Prices of the four Spark (formerly Telecom) buildings ranged from just under $50 million to close to $70 million and were also negotiated by Mr Hain, who said they sold to a mix of local and offshore investors. 

He says three of the buildings with new 10-year leases to Spark sold at yields of 7.25-7.45% and the fourth building, which was sold in conjunction with Bayleys Auckland’s Paul Dixon, was bought at an 8.5% yield reflecting the short- term nature of its lease to TVNZ, with only 18 months to run. 

The Spark leases have built in annual rent increases of 3% and the developer and vendor, Mansons TCLM, also provided a 10-year defects and capital expenditure warranty. The four 5 Green Star rated buildings range in size from 6316sq m to 7944sq m, share 300 basement carparks between them and are linked by a large central atrium. 

Other properties to sell have been the Pakuranga Plaza shopping centre for $96 million, three substantial Auckland land transactions in the CBD, Westgate and East Tamaki totalling $117 million, and Kirkcaldie & Stains’ Harbour City Centre property in Wellington for $45.85 million 

Bayleys’ managing director Mike Bayley says this is the biggest run of large commercial property sales the agency has had in its 42 year history, with a number of further big land sales also close to being concluded. 

He said the offshore buyers of some of the properties were from Singapore, Indonesia and China. 

He says the big lift in high value sales to foreign investors is expected to continue into 2015 now that a stable pro-foreign investment government has been re-elected and the kiwi dollar appears to be heading back to more realisitic levels. 

Bayleys’ national director commercial John Church says a big uplift in large land sales is also contributing to the increase in higher value sales. 

He says there has been a noticeable increase in the amount of land for sale as a number of longstanding owners have taken advantage of greater demand for development sites and their increase in value. 

Bayleys Wellington director Mark Hourigan, who was involved in the sale of the Harbour City Centre, says it is one of a number of substantial sales concluded in Wellington this year and reflected a positive change in the capital city. 

“Wellington has a fairly conservative investment environment and it generally takes longer for things to turn around than in Auckland. But there has definitely been an improvement in the mood of the property market here and some pent up demand is now coming to surface,” Mr Hourigan said. 

“We are once again getting multiple tenders on larger properties and our most recent auction portfolio drew very good bidding – with seven out of the eight properties offered selling under the hammer.” 

Neil Prentice writes for Bayleys Real Estate