Low yields feature of latest auction

5:00 AM Saturday August 20, 2016 Colin Taylor

A character two-level building at 3 Abbey St, Newton, fetched the highest price at $3,525,000 and one of the lowest yields at the auction of 4.31 per cent.

Continuing very strong demand from investors and falling interest rates resulted in seven investment properties selling at yields of under five per cent at Bayleys’ latest Total Property auction in Auckland.

A total of 12 properties sold under the hammer at a total value of close to $20 million. John Church, national director commercial for Bayleys, says the auction attracted one of the biggest crowds of the year, with spirited bidding across most offerings and a 70 per cent clearance rate.

The auction was held the day before the Reserve Bank cut the Official Cash Rate by another quarter of a percentage point to an all-time low of two per cent.

“The reduction was widely predicted and, along with the likelihood of further cuts ahead, it had clearly been factored into the prices that purchasers were prepared to pay We now have interest rates and commercial property yields at unprecedentedly low levels and that’s not going to change any time soon.

“However, there is still a limit to what purchasers are prepared to pay, particularly for properties that are in poorer locations,” Church says. “On three of the offerings that passed in after good bidding, the reserves were well above the level that the market was prepared to go to. So not all properties are going to sell at yields of less than five percent and property owners’ price expectations still need to take into account factors such as the strength of the location and tenant.”

True Commercial - 9 Orbit Drive%2c Albany.jpg

This office and warehouse unit at 9 Orbit Drive, Albany, sold for $2,125,000 at a 4.47 per cent yield.

The tone for the auction was set by the first property offered for sale, a well presented 336sq m industrial building on a 477sq m site at 6 Newsome St, Onehunga marketed by James Valintine and Greg Hall of Bayleys Auckland. It sold for $810,000 at a 4.07 per cent yield after attracting half a dozen phone bidders and at least that many in the auction room. It has a recently renewed four-year lease to Petty Dies & Laser Cutting Ltd, which also occupies an interconnected neighbouring property.

“The property is in a tightly held and sought after location in the heart of Onehunga’s industrial precinct, has an industry leading tenant with a large amount of plant and equipment committed  to the site and is in the popular sub $1 million price range that attracts a lot of investors,” says Valintine..

 “It also has a Mixed Use zoning under the Proposed Auckland Unitary Plan [PAUP] which enhances its development potential. The combination of these factors produced a very good result on the auction floor.” 

The second property offered for sale, a character two-level building on a 607sq m Mixed Usezonedsite at 3 Abbey St on the corner with Gundry St, Newton, fetched the highest price and one of the lowest yields at the auction.  It sold for $3,525,000 at a 4.31 per cent yield though Dave Stanley and Tony Chaudhary of Bayleys South Auckland, and Alan Haydock of Bayleys Auckland.

The building has been occupied by high profile art auction house Art + Object for the last nine years, which has exercised a final three-year right of renewal from September 2016, opening up the option of further developing the site in 2019.

True Commercial - 6 Newsome St%2c Onehunga.jpg

At 6 Newsome St, Onehunga, this industrial building sold for $810,000 at a 4.07 per cent yield. 

Three industrial properties on the North Shore all sold at yields of under five per cent:

• A 644sq m road front office and warehouse unit at 9 Orbit Drive, Albany built in 2006 with 10 carparks sold for $2,125,000 at a 4.47 per cent yield through Matt Mimmack and Ashton Geissler of Bayleys North Shore Commercial. It has a new six -year lease to Advanced Lighting Technologies (NZ) returning net annual rental income of $95,000 plus GST but increasing to $110,000 in 2017.

• A 521sq m warehouse on a 1011sq m site 15 Kaimahi Rd, Wairau Valley, was sold for $1,369,000 at a 4.73 per cent yield by Mimmack. Established tenant Geovert Ltd has renewed for five years from August 1.

• A 246.5sq m industrial unit at 9 Parkhead Place, Albany, with 38sq m of office and amenities and the balance high stud warehousing was sold for $655,000 at a 4.43 per cent yield by Mimmack and Laurie Burt. It has a lease expiring in June 2017.

Mimmack says the first two properties were purchased by investors attracted by their new leases and the prospect of rental growth. The Parkhead Place unit was bought by an owner occupier who will move into the premises when the current lease expires and who had to compete with investors and other owner occupiers to secure the property. It was declared on the market at $600,000 by auctioneer Richard Valintine and attracted 20 further bids, many of them $1000 increases, before finally selling.

True Commercial - 471 Mt Eden Rd%2c Mt Eden.jpg

At 471 Mt Eden Road, Mt Eden, this corner retail site with six carparks sold for $1,885,000 at a 4.66 per cent yield

“Smaller modern industrial units with a high warehouse to office ratio like this one are in very short supply on the Shore and are attracting huge competition,” says Mimmack. “There is also big demand for investment offerings because of the current very low industrial vacancy rates of just 2.6 per cent in Albany Basinand close to zero in the Wairau Valley which means there is a very low tenant vacancy risk.”

Two other auction properties sold at under five per cent yields. A 113.5sq m retail building with a short term tenancy on a 273sq m corner site at 471 Mt Eden Road, Mt Eden with six carparks sold for $1,885,000 at a 4.66 per cent yield and a land value of $6905 per sq m through Phil Haydock of Bayleys Auckland.

Haydock says the strong interest in this property was generated by the strength of its location.

“While not a big site, it’s in one of the most prominent, north facing corner positons on Mt Eden Road. There’s also huge upside potential with the zoning being upgraded from Business 1 to Mixed Use under the Unitary Plan. This will unlock the property’s valuable underlying double Grammar school zoning and enable more intensive residential development.”

A 313sq m  single-level character building on a 377sq m town centre site at 2-6 Todd Plaza, New Lynn sold for $2,110,000 at a 4.99 per cent yield through Chaudhary and Amy Weng of Bayleys South Auckland, and Mike Adams of Bayleys Auckland. It is fully leased to a dairy, Thai restaurant and Glover Real Estate office.

The auction on this property was bought forward after the vendors received a pre-auction offer they were prepared to accept, with bidding starting at the declared reserve of $1,975,000..

Two CBD properties also sold under the hammer. A 173sq m retail unit on ground floor of a seven-storey character building at 3-7 High St, sold for $2,830,000 at a 5.3 per cent yield through Sarah Boles of Bayleys Auckland. It has a new three-year lease to fashion retailer Flo & Frankie from October 1, plus three three-year rights of renewal.

True Commercial - 5 High St%2c Auckland CBD - interior.jpg

This  retail unit on ground floor of a seven-storey character building at 3-7 High St, sold for $2,830,000 at a 5.3 per cent yield

Fifteen fully furnished serviced apartments plus additional space currently used as a common room, totalling 447sq m on two titles on one floor of the Waldorf Tetra Apartment building at 85 Wakefield Street sold for $2,750,000 at a 5.53 per cent yield through Quinn Ngo, James Chan and Matt Lee of Bayleys’ international division. The apartments are leased to Waldorf Group until February 2018 with no right of renewal.

Other properties to sell were:

• A 959sq m freehold site (buildings not included) at 93 Selwyn St, Onehunga, and zoned Terrace Housing & Apartment Building under the PAUP which sold for $1.7m at $1772 per sq m through Paul Dixon of Bayleys Auckland and Chaudhary. It is leased to a community trust childcare centre until February 2018, with a six-month cancellation clause, producing holding income of $12,000 per annum net plus GST.

• A 1469sq m two-level warehouse and office building on a 1142sq m site at 80 Delta Avenue, New Lynn sold for $1.7m through Grant Miller, Laurie Bell and Adams of Bayleys West Auckland division. It is partially tenanted at $54,050 per annum net plus GST with the vendor occupying the balance.

• A 121sq m ground floor unit in a commercial complex at 42 Constellation Drive, Albany, leased to 3A Copies & Design Ltd, sold for $560,000 at a 5.36 per cent yield through Owen Ding and Chan of Bayleys international division and Eddie Zhong, Bayleys North Shore Commercial.