Land prices drive redevelopment of properties

5:00 AM Saturday August 15, 2015 Colin Taylor

This car park at 520-536 Karangahape Rd and 2 Gundry St sold for a record $3938 per sq m for a large Mixed Use development site.

Barfoot & Thompson Commercial is marketing a number of properties that are ripe for redevelopment due to rising land prices in the Auckland city fringe and suburban centres.

Commercial broker Cam Paterson says thevalue of Auckland commercial land has been highlighted by the recent sale of a vacant 1272 sq site at 520-536 Karangahape Rd and 2 Gundry St leased for car parking.

The site, just 600 metres from Queen St, was sold by Paterson and colleague John Stringer for $5,010,000. “It set a record of $3938 per square metre for the sale of large Mixed Use development site,” Paterson says.

Another vacant 1057 sq m site zoned Business 2 at 554 Great North Rd, was sold through Barfoot & Thompson Commercial for $2.4 million or $2270 per sq m. “This shows the difference between Mixed Use and Business 2 zone land.”

A third vacant Mixed Use site of 744 sq m at 13 & 15 Kingsland Terrace was also sold by Paterson in February fetching $2,108,000 or $2,833 per sq m.

He says a prime example of a potential redevelopment site currently on the market is the sale of a lessee’s interest in a 2344 sq m Mixed Use zoned commercial site at 110-116 Carlton Gore Rd, Newmarket.

This is being marketed by Stringer and Paterson who are selling it by expressions of interest closing at 4 pm on Thursday, September 10.

Stringer says the buildings occupying the leased land comprise a single level 1713 sq m development with holding income of $181,454 net after deduction of the ground rent of $260,000. The weight average lease term for the mix of nine retail, commercial and residential tenancies along with 21 car parks is 2.38 years. 

“The site encompasses the block between Morgan St and Clayton St with substantial frontage onto Carlton Gore Rd. As such the property is ideally suited for redevelopment to take advantage of the favourable zoning under both the current and proposed Auckland plans,” Stringer says.

“It is a superbly located redevelopment property with three street frontages and a height allowance of six storeys or of 24.5m sq m under the Auckland Council District Isthmus Operative Plan - and the same height limit as a Mixed Use zoned property under the Proposed Auckland Unitary Plan (PAUP).

The site is contour shaped as a comparative rectangular parcel with as frontage to Carlton Gore Rd of 52 metres, Morgan St 10 metres and Clayton St 44 metres.

“It encompasses the entire block of land to the northern side of Carlton Gore Rd, between Morgan Street and Clayton Street, except for a corner site to Morgan St. The property sits about 100 metres west of an intersection with David Crescent, which acts as a link road through to Broadway.”

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The commercial site at 110-116 Carlton Gore Road, Newmarket, in which the lessee’s interest is for sale – identified by a red border. 

Paterson says the property has undergone partial refurbishment and reconfiguration to create nine retail and showroom tenancies plus a residential flat fronting Carlton Gore Rd. Five of the car parks fronting Carlton Gore Rd and 16 parks are to the rear accessed off Clayton St.

The building at 110-114 Carlton Gore Rd was formerly a purpose built tyre repair workshop recently converted to provide three separate retail tenancies. The main access is via glazed entrances to the Carlton Gore Rd and trade entrances from Clayton St.

At 116 Carlton Gore Rd, a  single bay former workshop building was subdivided to provide two retail tenancies onto Carlton Gore Rd with a further tenancy to a medium stud workshop at the rear on Clayton St which sits about 1.5 metres below the street level. In addition a small coffee kiosk tenancy sits on Carlton Gore Rd.

Another building on the same leasehold site but at 1 Morgan St is a detached single bay warehouse building essentially leased on a bare shell basis.

“The tenant has fully fitted out the tenancy to convert the space to showroom,” Paterson says. “To the rear of the building is a single roller shutter door accessed via a concrete ramp off the Clayton St car parking area along with a basic kitchenette and amenities area.”

The current allowable floor area ratio (FAR) under the zoning is two-to-one metres although a maximum total floor area ratio of four-to-one metres is provided upon satisfying the bonus criteria.

Paterson says that under the Draft Unitary Plan permitted activities for the site include the construction of educational activities, offices up to 500 sq m gross floor area, retail up to 450 sq m and some community and service industries.

“The Draft Unitary Plan does not provide for a specific floor area ratio with site intensity controlled through the use of maximum height and setback controls,” he says.

A second ideal redevelopment property that Paterson is marketing, also by tender closing on September 10, is at 12 & 14 Edinburgh St in Auckland City..

The property is half way down on the eastern side of Edinburgh St about 50 metres below Karangahape Rd and about 100 metres to Newton Rd.

“It has excellent connectivity to the CBD and most inner city suburbs including Ponsonby, Grey Lynn, Parnell, Grafton, Newmarket, Kingsland and Mt Eden,” says Paterson.

“The immediate area has a colourful past and is undergoing a renaissance with several apartment and commercial developments underway including three large scale office conversions on Hopetoun St and two new buildings at 5 Howe St and 373 Karangahape Rd.”

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The potential redevelopment site for sale at 12 & 14 Edinburgh St in Auckland City.

The regular rectangular land parcel is 666 sq m in two freehold titles with a frontage to Edinburgh St of 20 metres and a depth of 32 metres.

“The site is on the Karangahape Ridge and has views to the south over the State Highway 1 motorway to Eden Terrace,” Paterson says.

The operative Mixed Use zoning allows for a height potential of up to 15 metres with a two-to-one metre FAR of up to four-to-one metres which would allow for a 2664 sq m development.

The PAUP indicates that this property in the City Centre zone would be allowed a basic FAR of three-to-one metres with a maximum height of 15 metres.

Another potential redevelopment property Paterson is marketing, this time with colleague Ben Johnson, is located at 17 Nikau Rd, Otahuhu, and is again for sale by tender closing closing on September 10.

The Business 4 zoned freehold site of 3378 sq m site, with a building area of 1184 sq m, is occupied two standalone commercial buildings housing six individual commercial units ranging in size from 120 sq m to 260 sq m which share car parking and yard space. An additional 80 sq m standalone residential dwelling sits to the eastern boundary. All the commercial tenancies including the residential component are currently leased returning a rental of about $130,000 per annum. 

“This sale represents a chance to purchase a substantial industrial land bank with holding income in a sought after location,” Paterson says.

“This is a freehold commercial property on one title occupied by two commercial buildings and one residential dwelling. The site has significant rental upside and flexible lease arrangements.”

Paterson says the site is one of few under the PAUP to be rezoned to Mixed Use. 

“The flexibility of the tenancies and the holding income should appeal to investors, owner occupiers, developers and land holders seeking a well positioned site for potential future residential development,” he says.

Johnson says the irregular rectangular land parcel is on the western side of Nikau Rd on the fringe of Otahuhu's industrial precinct. Entrance to the site is via a sealed driveway from Nikau Rd.

“Otahuhu has been an established commercial and industrial hub for more than 40 years,” he says. “It has good access to other major industrial suburbs like Mt Wellington, Penrose and Onehunga via arterial link roads in the north, south and west. The State Highway One north-south motorway is also matter of minutes away giving access to the Auckland CBD and Auckland airport with 15 minute drives.”

Johnson says the Otahuhu is no longer classified as being part of south Auckland but as part of “the central commercial belt", due to the steady growth of southward march of commercial locations.

“Larger corporations that have invested significant capital into developments within Otahuhu's commercial boundaries include Goodman Property, James Kirkpatrick Group, Sampson Corporation and Southpark Corporation.

“Having these large scale property developers and investors reshaping the commercial area has lifted the desirability and calibre of this location dramatically,” Johnson says. 

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Cam Peterson of Barfoot and Thompson.