YEAR IN REVIEW: Industrial property the big mover but retail still pumping

Industrial property was the big market mover in 2014, according to Bayleys national director commercial John Church.

He says this is reflected in the firmer yields on investments. 

Vacancy levels in many parts of the country are at historically low levels, Bayleys researchers indicate.

Investors have responded “with gusto” to an improved supply of tenanted investment offerings, creating new benchmark yields, Mr Church says.

Capitalisation rates on industrial investment property have firmed.

An example is the sale of Bell Tea’s modern production facility in East Tamaki, Auckland for $10.8 million at a low yield of 5.8%.

The office sector has also improved significantly this year, although is a more tiered market with more demand for top-quality premises and little interest in bottom-tier properties, particularly if they have seismic issues.

The middle tier of the market which offers “an acceptable level” of accommodation is experiencing some increase in demand and rental growth because there is little top quality office accommodation available for lease, Mr Church says.

For the retail sector it has been “business as usual” for the strongest performing sector of the investment market for many years.

“Yields have remained firm at low levels in 2014 for better quality offerings, particularly at the smaller value end of market, and it’s hard to see them going much lower.”

Mr Church was referring to a plethora of sales in the less than $5 million price bracket, which has seen many small units sold at high prices, particularly to Asian buyers.

Small shops have always been the most active segment of the commercial and industrial property sales market and there has been an increase in the volume of sales this year.

There has also been a rise in retail sales of properties in the $5-10 million price bracket.

Bayleys agents brokered some of the bigger commercial deals of the year including four buildings in the Spark head office complex in the Auckland CBD on behalf of developer Manson TCLM for close to $250 million, to local and offshore buyers.

They also sold the Pakuranga Plaza shopping centre for $98 million, three Auckland landholdings totaling $117 million, and an office and retail building at 1-7 The Strand, Takapuna where Auckland Council is the main tenant, for $70 million.

Mr Church predicts more big sales in 2015, particularly if the Kiwi dollar continues to weaken against major currencies such as the US. The constraining factor will be a shortage of quality properties available for purchase, he says.

He also notes the revival of the Wellington market with a Bayleys Wellington’s sale of Kirkcaldie & Stains’ Harbour City Centre property in Lambton Quay for $45.85 million.

Bayleys Wellington director Mark Hourigan says there has also been a pickup in Wellington’s auction market with 11 out of 14 properties selling under the hammer at Bayleys last two Total Property auctions.