Record year for commercial property sales
Generic view of Auckland CBD commercial properties looking down Queen St from above old town hall and Aotea Square.
The volume of commercial property sales in New Zealand has reached its highest level on record for this time of year driven by greater levels of foreign investment according to commercial real estate agency JLL.
“In the year to date, investors have acquired more than $2.8 billion worth of New Zealand’s industrial, retail, and office properties compared with $2.1 billion in the previous year,’ says Nick Hargreaves, managing director for JLL.
“This makes it the largest volume of commercial property stock ever transacted within the same period of any year.”
JLL tracks every commercial transaction in New Zealand above $5 million and is forecasting the total figure to reach well over $3 billion by December 31 with a number of large commercial properties still under contract. The agency says total sales volumes are up 25 per cent over the 2013 full year volumes and both Auckland and Wellington have hit record levels of sales.
“We are only in October and sales volumes are already at their highest level with well over another $500 million expected to be transacted by the end of the year,” Hargreaves says.
He says the number of large pending Auckland sales include 152 Fanshawe St and Eden Business Park which have both been marketed by JLL.
“We are likely to reach well over $3 billion by the end of the year which will make this year the largest volume of transactions in any given year by a clear margin,” Hargreaves says.
Nick Hargreaves, managing director for JLL; ‘We are likely to reach well over $3 billion by the end of the year’.
“These record figures prove to investors there is a significant amount of liquidity in New Zealand. Local investors and those in Australia, Europe and Asia see New Zealand as a leading destination for capital and a key location in the Asia Pacific region. The yield spread available on prime assets in New Zealand is relative to regional peers and the growth outlook means we are seeing a number of global institutional investors looking to include New Zealand as part of their wider global allocation.”
JLL Research says Auckland’s total sales are sitting at $1.89 billion year to date with sales volumes up 8 per cent from 2013.
“The real winner is Wellington which has increased at a faster rate than Auckland,” says Justin Kean, national director of research and consulting for JLL. “Wellington had a 46 per cent increase in the total number of sales and highest recorded level of $488 million worth of transactions.”
Kean says institutional commercial property stock in Auckland is being actively pursued by investors who are stepping outside their traditional focus and moving away from premium A-grade assets down into the lower A-grade properties and into B-grade buildings.
“Also investors are also looking past Auckland for stock which is largely the reason we see Wellington benefitting.”
Kean says international investors have had access to increasing levels of cash this year, but the issue of ‘scarcity of quality stock’ remains.
“Premium properties are limited with both Australia and New Zealand markets lacking the supply of trophy assets to meet the current need of investors,” he says.
Justin Kean, national director of research and consulting for JLL.
JLL Research says the biggest contributors to this years’ record total were office transactions making up 46 per cent of all sales volume and totalling over $1.3 billion year to date. This compares to $1.1 billion for 2013.
The largest recorded transaction this year was PSP Investment’s purchase of AMP Capital Property Portfolio for $1.2 billion which was made up of 18 properties across New Zealand. The largest single asset to transact was The Lumley Centre which sold to Deka Immobilien for $146 million with a yield of 7.1 per cent through joint agents JLL and Knight Frank.
Other large deals of note included the recent sale of Pakuranga Plaza to a Singaporean based buyer for $96 million; the sale of Chorus House at 66 Wyndham St to a private onshore investor for $88 million; Telecom Building C went to Augusta Capital for $65 million at a 7.5 per cent yield; and Grant Thornton House in Wellington sold to a private foreign investor for $63 million at a 7.4 per cent yield.
“The proportion of foreign capital finding its way into the New Zealand commercial property market has also significantly increased with a total of 48 per cent of capital coming from foreign investors in 2014 compared with only 13 per cent in the previous year,” Kean says.
Auckland continues to remain the main hub of activity in the commercial property space accounting for 68 per cent of total sales volume in 2014. Wellington remains in second place with around 17 per cent of all deals and the remainder of New Zealand takes up the rest.