It’s a case of ‘boom or bust’ for Hawke’s Bay’s commercial, retail, and industrial property markets at present, according to a new real estate research report.
The ongoing strength of Hawke’s Bay’s horticulture, pip-fruit, and viticulture industries has seen a building boom for large scale cool-store and food processing plants in the region, according to latest data from Bayleys Research.
However, at the other end of the scale, retail premises in both central Napier and Hastings are ‘doing it tough,’ with little good news on the immediate horizon.
Bayleys Research senior analyst Goran Ujdur said that with Hawke’s Bay’s primary produce sector exports up 16% in the year to March 2015 compared to the same time last year, and the Port of Napier anticipating total container volume growth to reach 20% over the coming year, building infrastructure in the sector had been ‘bullish’.
“A standout performer in the industrial sector has been the construction of new cool store and pack-house facilities supporting the growth and expansion in the horticulture sector. Demand for further storage and logistics related facilities is expected to continue to grow,” Mr Ujdur says.
“The Hawke’s Bay region is a major producer, processor and exporter of primary products – such as beef, lamb, fruit and vegetables, forest products and wine.
“The strong influence of primary industry is apparent within the industrial property sector – with the region housing a high proportion of specialist buildings such as pack-houses, cold/cool stores and controlled atmospheric buildings catering for corporate and independent growers.
“Local property developers are supporting this growth, such as Tomoana Food Hub, an industrial food park recently set up on 16 hectares on Heretaunga Plains, with plans to build more than 100,000sq m of factory space designed specifically to meet the needs of food companies.”
Mr Ujdur says much of the growth is also directly attributable to the booming export prices being achieved for the likes of apples and wine.
“The apple industry in particular is leading a mini-boom in new storage and processing facilities. For example, miniature apple grower and marketer Rockit has invested $17 million into a purpose-designed and built state-of-the-art food packaging facility in Havelock North, which employs more than 70 people during the harvest season,” Mr Ujdur says.
“Simultaneously, a number of wineries have also committed to new facilities – including Delegat Group’s landmark 19,000sq m winemaking facility on a 13ha site on the corner of Evenden and Ormond Rds in Hastings.
“Villa Maria also has plans to construct a 16,000sq m facility next to Te Awa Winery in the Gimblett Gravels region.”
Mr Ujdur says there could well be some softening in rents for older, secondary-grade cool store premises if the supply of newer cool store facilities continued to grow at current levels.
He says implementation of the Ruataniwha Water storage scheme is critical to keeping up the economic momentum for the region’s industrial property sector – with a likely spin off forecast to be in the “tens of millions of dollars” range.
However, in stark contrast, operating conditions for the region’s central-city retail sector are bleak – with suburban ‘big box’ retailing hubs and new mixed-use precincts such as Ahuriri competing with the CBD.
“Reflecting the challenging conditions for traditional CBD retailers, Napier prime retail rents have remained flat over the last 12 months – with little growth expected over the next year,” Mr Ujdur says.
“Secondary location rents have softened over the past 12 months and, with high vacancy rates persisting in some poorer quality locations, further softening is likely going forward.
“Both prime and secondary retail rents in Hastings, which are around half the value of those of Napier, have weakened over the last year and, with current vacancy levels continuing to remain soft, further falls are expected.
“Further retail closures are expected and, with weak retail demand, shop vacancy rates are unlikely to show any significant improvement any time soon.”
Meanwhile, activity in Hawke’s Bay’s commercial office and industrial property markets – other than premises involved with the primary productive sector – has remained relatively subdued following a significant burst of development activity and tenant reshuffling over 2012/2013 period, he says.
“This has led to increased vacancies among poorer grade commercial premises in Napier and, to a larger degree, Hastings. This vacancy situation will take time to resolve, the Bayleys researcher says.
“Activity in Napier’s CBD office leasing market remains very subdued. Much of the development activity that occurred over the 2012-2013 period was largely a reshuffling of existing tenants into better-quality space, along with some speculative seismic strengthening.
“Rents for both office showroom and warehouse space has remained relatively flat over the past year, and is expected to remain flat for the next 12 months. With plenty of appropriately zoned land available, any increase in demand is readily met with supply, which keeps a natural cap on rental growth.”
Scott Cordes writes for Bayleys Real Estate
Scott Cordes
Fri, 04 Sep 2015
