Bayleys year ends with a bang
The site at 386 Ti Rakau Drive, East Tamaki occupied by Gull Petroleum (NZ) achieved top price at the Auckland auction.
The sale of 28 commercial and industrial properties at auctions across the North Island has capped off one of the strongest years ever for Bayleys Real Estate’s commercial and industrial business.
The final Total Property portfolio auctions for 2014 in Auckland, Tauranga, Rotorua and Wellington saw 47 properties put up for sale with a clearance rate of over 60 per cent so far producing sales with a total value of nearly $37 million.
These ranged in price from $258,000 to just under $3 million with over 20 of the properties selling at the Auckland auction.
John Church, Bayleys’ national commercial director, says 2014 is set to be the best year the commercial and industrial property market has experienced since the Global Financial Crisis in 2008. He says there was a very strong start to the year with volumes of both sales and leasing activity in the first six months well up on the first half of 2013 and the market picked up even more momentum in the latter part of the year.
“As usual historically, activity slowed a little in the lead up to the September election with some uncertainty around whether a stable coalition Government could be formed,” Church says. “However, with those concerns now allayed and a capital gains tax also off the political agenda, we are experiencing a very, very strong finish to the year in traditionally the busiest trading time of November through to mid December.”
In the first 11 months of 2014, Bayleys Auckland, Manukau and Counties offices were involved in 830 commercial and industrial property transactions with a total value of approximately $1.25 billion, up 15 per cent year on year.
In the latter half of the year, Bayleys Auckland office negotiated a number of substantial transactions including the sale of all four buildings in the Spark head office complex in the CBD for close to $250 million, the Pakuranga Plaza shopping centre for $98 million and three substantial land transactions totalling $117 million.
It’s been a similar story across the bridge, where Bayleys North Shore Commercial concluded over $100 million worth of transactions in October, a record month for the office according to director Daryl Devereux. A big contributor to this was the $70 million sale, in conjunction with Bayleys Auckland, of an office and retail building at 1-7 The Strand, Takapuna in which Auckland Council is the main tenant.
It was also a busy year on the leasing front for Bayleys North Shore Commercial which was involved in 156 leasing transactions encompassing about 50,000 sq m of commercial and industrial accommodation which generated around $8.25 million in rental income for North Shore landlords. This was up around $1 million on the total rental income for the same period last year involving 136 transactions and approximately 40,500 sq m of space.
“This will be the best year Bayleys North Shore Commercial has had since it was established in 1997 and reflects the combination of a buoyant market and growth in our agency business with our number of salespeople continuing to grow to over 20,” Devereux says.
Church says the big sales grab the headlines but the under $5 million price bracket remains the most active segment of the commercial and industrial property sales market. It accounts for the bulk of transactions and has led the increase in the volume of sales this year.
The sale of this office and retail building at 1-7 The Strand, Takapuna contributed to a record month for Bayleys North Shore Commercial.
All of the latest Total Property auction sales were under $3 million with multiple bidders on many of the properties.
“We had up to seven or eight bidders on some of the offerings and a lot of investors walked away disappointed because they were unable to secure the property they wanted,” says Church. “But the flip side of this is that there were some very happy vendors, with prices well above reserve on a number of sales because of the strong competition on the auction room floor.”
An example of this was a two level 309 sq m building on a 551 sq m corner siteat 1 Wooton Rd, Remuera,with a commercial tenancy and vacant residential space on the ground floor and two residential tenancies above. Located in Remuera’s medical precinct and earning $67,000 net a year, it attracted close to 50 bids before selling to a Chinese buyer for $2,310,000 through Quinn Ngo of Bayleys Auckland’s international sales division, who transacted the sale in conjunction with Shane Snijder and Robert Ashton of Bayleys’ Counties office. Bidding started at $1 million and progressed relatively quickly to $2 million when the property was declared to be “on the market”, or above reserve, by auctioneer Richard Valintine. A long sequence of bids then followed, getting down to $5000 increments towards the end, which added more than $300,000 to the eventual sale price.
This two level building on at 1 Wooton Rd, Remuera, in Remuera’s medical precinct attracted close to 50 bids before selling to a Chinese buyer for $2,310,000.
There were a similar number of bids on another property with redevelopment potential at 39 Great South Rd, Pokeno. It comprised a 1518 sq m corner site zoned Business 8A (multi-use within industrial) with 606 sq m of partially tenanted retail, office and warehouse space producing net annual rental income of $31,200. This was declared on the market at $725,000 at which point a number of new bidders showed their hands and it eventually sold after 25 further bids for $816,000. Bayleys Manukau’s Tony Chaudhary, who sold the property in conjunction with Snijder and Peter Migounof of Bayleys' Counties office, says the new owner has no immediate plans to redevelop the site and acquired it as a long term hold because of the town’s growth prospects. He has also recently purchased property in Karaka for similar reasons.
Snijder says Pokeno is increasingly coming onto the property investment radar because it has been earmarked for considerable future residential and commercial growth.
“This is already happening with a new $220 million dairy factory in the Gateway Business Park on the outskirts of the town and Stevensons’ Drury South 223 ha business park will be a big, long term project that will also generate significant employment opportunities for people living in Pokeno.”
There was also spirited bidding on a number smaller retail investment properties at the auction. A 129 sq m two-storey building on a 197 sq m site at 473 Lake Rd, Takapuna, with a Japanese restaurant on the ground floor and an apartment above sold for $800,000 at a 6.63 per cent yield through Damian Stephen, Eddie Zhong and Terry Kim of Bayleys North Shore Commercial. This property was declared “on the market” at $700,000 but competition among bidders pushed the price up a further $100,000, with many $1000 increases, before the hammer finally came down.
A two-storey building at 473 Lake Rd, Takapuna, with a Japanese restaurant on the ground floor and an apartment above sold for $800,000.
Stephen, Zhong and Kim also sold a 92.5 sq m cafe in the centre of the 13 shop Seville retail complex in Oteha Valley Rd, Albany for $560,000 at a 6.42 per cent yield. And in Auckland’s CBD a 48 sq m retail unit occupied by a convenience store and money exchange business at 9B Victoria Street East, sold for $775,000 at a 6.19 per cent yield through Quinn Ngo and Matt Lee.
The highest prices achieved at the Bayleys auctions were for two properties put up for sale on behalf of NZX listed DNZ Property Fund by Bayleys Wellington's Mark Hourigan, Fraser Press and James Higgie. Located inNgauranga, one was purpose built premises for Armourguard which sold for $2.9 million at an 8.62 per cent yield and the other was a milk distribution depot with a new nine year lease to Fonterra which sold for $2,850,000 at an 8.07 per cent yield
Top price at the Auckland auction was $2,820,000 for a 2121 sq m site at 386 Ti Rakau Drive, East Tamaki occupied by Gull Petroleum (NZ) on a 15-year lease until December, 2015 which was sold by Tony Chaudhary and Shayne Snijder
“In combination with continuing low interest rates, the fact that a large number of bidders were unsuccessful at the latest Total Property auctions indicates there is still a lot of unsatisfied, pent up buyer demand in the market which bodes well for a continuation of the current strong level of activity in 2015,” Church says.
Bayleys will be looking to capitalise on that with an early start to the year, with its first portfolio, Greater Auckland, being released on January 30. Church says properties are currently being sourced for this portfolio.
John Church of Bayleys