Provincial properties join in the action

Strong investor demand for Wellington and provincial properties was a feature of Bayleys Realty Group’s first national commercial and industrial portfolio auction for the year.  

A total of 26 properties featured in Bayleys’ Total Property portfolio sold at auctions in Auckland, Hamilton, Rotorua and Wellington at a total value of just under $30 million. 

Bayleys’ national commercial director John Church says a highlight of the auctions was the high clearance rates at auctions in Wellington and Rotorua where 12 out of 14 properties put up for sale sold under the hammer. 

“What was particularly pleasing was the strong performance of provincial offerings, with 10 out of 11 properties in Northland, Hamilton, Rotorua and Wanganui selling, with some setting new benchmark yields in the process. This suggests that the recovery that has been evident in Auckland for some time is now permeating into other parts of the country.”

Four of the Rotorua properties to sell were in a recently completed 10-unit retail complex in a prime city fringe location on Fairy Springs Rd (SHW 5). A 120sq m Burger Fuel unit with a new 10-year lease sold at 5.95% yield, which sales agent Mark Rendell says sets a new level for what investors are prepared to pay to secure good property in Rotorua. The other units weren’t far behind with a Best Sushi outlet, a bakery and superette – all on six year leases – selling in a tight yield band of 6.56-6.69%. 

“These yields are getting closer to returns you would see in Auckland and it shows that investors are looking at Rotorua now, with buyers of the units coming from Auckland, Hamilton and Matamata,” Mr Rendell says.  

Also sold in Rotorua was a significantly redeveloped vehicle testing station in  Fenton Park, with a new 10-year lease to VTNZ,  for $2,400,000 while a  792sq m fully leased two-level, 10-year-old CBD office building went for $1,700,000 at an 8.7% yield. 

There was also strong bidding in Hamilton on a 2360sq m warehouse and office building on a 5273sq m site in Wickham St, Frankton, which sold for more than $200,000 in excess of reserve for $2,460,000 at a 7.5% yield on a new five-year lease. 

At the Auckland auction, a new 200sq m building in central  Dargaville leased to Rabobank for nine  years sold for $885,000, at a 6.6% yield. “This would be one of the firmest yields achieved for a Northland commercial property and reflects the quality of the development undertaken by Wallace Development  Company and the long lease to one of the world’s biggest banks,” sales agent Ross Blomfield of Bayleys Whangarei office says.

A Burger King outlet in Wanganui featured in the Wellington Total Property auction sold for $1,855,000 at an 8% yield.  Antares Restaurant Group has recently completed a  major refurbishment to the premises it has occupied since 1998 and has a 10-year lease from December 2013. 

Also selling at the Wellington auction for $2,040,000 at a 7.8% yield was industrial premises built in 2010 for NCR (NZ) in Broken Hill Rd, Porirua, with the multinational having just exercised its first five-year right of renewal. An 878m² bulk retail centre at Park Rd,  Miramar went for $1,920,000 at a 7.5% yield with a six-year leaseback to anchor occupant, a 4 Seasons Home & Leisure Centre. 

Mr Church says there has been a noticeable improvement in the mood of the Wellington market since the latter part of 2014  and pent up demand is now coming to the surface, reflected in increased sales and leasing activity. Bayleys Wellington also had two busy leasing months in March and April, with 25 transactions negotiated across all sectors of the market  and a 3300sq m industrial lease in Seaview recently concluded to a state-owned enterprise for nine years at a net annual rental of $390,000.  

Two investors based in mainland China were the top bidders on two of the 13 properties which sold in Auckland. A buyer from Dalian, in northwest China, bought a 3298sq m  residential development site at 276 Te Atatu Rd, Te Atatu South, west Auckland for $1,780,000, at $534 a square metre. James Chan of  Bayleys’ Auckland-based international division said the buyer  was attracted by the site’s terrace housing and apartment zoning under the proposed Auckland Unitary Plan, which would allow more intensive residential development. 

A Chinese buyer based in Guanzhou also bought a childcare centre in Mangere East for $1,320,000, at a 5.9% yield. Mr Chan said the main attraction for this offshore buyer was the new 15-year lease to NZX listed Evolve Education Group which operates childcare centres throughout New Zealand. 

He said while most offshore Chinese interest has been focused on large scale investment and development property opportunities, increasing interest was being shown in smaller properties, particularly by investors interested in emigrating to New Zealand. 

Local Chinese and Indian investors were buyers of many of the other properties at the Auckland auction with a block of three flats in Shoreham St, Avondale, selling for $1,166,000 at a low 3.5% gross yield.  Three retail outlets in converted former cinema premises in the Highland Park Shopping Centre in Pakuranga also sold at low net yields of 5.4-5.8% with long-term leasebacks to the Coffee Club, Pita Pitt and Tank.

The highest bid at the Auckland auction was $7,500,000 for a multi-tenanted commercial building in Central Drive, Henderson producing net annual rental income of $569,290 but that was below reserve.

Neil Prentice writes for Bayleys Real Estate