Highest sales in Christchurch since quakes
Investors, syndicates and institutions are buying into the Christchurch market. Photo / Supplied
Nearly a quarter-of-a-billion dollars in commercial property sales during the second half of last year, is the highest level for Christchurch since the global financial crisis and post-earthquakes, says a new research study.
CBRE’s first quarter 2017 Christchurch MarketView report reveals 41 per cent of the $242 million in sales volume was within the office market with an increase in levels of transactions over $5 million.
The report says the buyer market was split among private investors, syndicates and institutions contributing 31 per cent, 28 per cent and 20 per cent to purchasing activity respectively.
The trend come amidst a two-year high in regional economic confidence, a return of white collar workers to the CBD following building completions, and an expected arrival of international retailers.
Current building space and that under construction is estimated to total 241,000sq m.
Tim Rookes, managing director of CBRE’s Christchurch office, highlights the opening of H&M’s first South Island store in 2017; along with the opening of a Top Shop when The Crossing is completed; as being particularly welcome at a time when retail sales have seen a 2.6 per cent year-on-year decline in the December 2016 quarter.
“The CBD is fighting back aggressively against the retail destination monopoly that the large shopping malls have held since 2010,” Rookes says. “With prominent international brands in world class stores, retail within the CBD is well positioned for 2017 and beyond.”
The increased focus on the CBD does come at the expense of the suburban office market according to the report, with more backfill vacancy expected to occur in 2017 due to relocations to the CBD.
With a 33-basis point yield softening in the past year for suburban office market, Rookes says the impact of the flight from the suburbs back to the CBD remains obvious.
“Yields are expected to continue to soften in Christchurch suburban office market as forecast vacancy in 2017 and 2018 provides no respite. It also means elevated incentive levels are the new standard as owners attempt to attract tenants or retain tenants which are considering relocating.”
On the development front, the report indicates there is sustained activity particularly in the west of the city, as industrial occupiers look to expand and capitalise on land availability, low interest rates and business growth.
Sustained industrial development has driven rental declines – at least partially – but with considerable development land available and competitiveness in the development market to secure occupiers, it’s expected rentals will decrease slightly further in 2017.
Rookes says while prime industrial stock still provides the firmest yields in the region they are moving towards a period of stability balanced against a number of factors.
“On the face of it, demand from investors for smaller value buildings coupled with an active owner occupier market provides an environment conducive to firming. However so far in 2017, the financial limitations from the banking sector have resulted in some of this demand falling off. We would be surprised to see further firming and expect to see yields stabilise throughout the rest of this year.”
Tim Rookes, CBRE Christchurch.