Record year likely for commercial property sales
The Lumley Centre is one of this year’s high profile sales.
New Zealand is set for its best year in commercial property sales since 2007, says Zoltan Moricz, senior director of research for CBRE.
Writing in CBRE’s latest New Zealand Investment MarketView report, Moricz says the value of sales in the first six months of this year reached $1 billion, with another $1.2 billion transacting just in July and August.
“2014 will likely prove to be one of the historic watershed years for transaction activity both in terms of sales volumes and purchaser spread. Only 2007’s combined total of $3.7 billion should surpass 2014 in terms of total value,” he says.
Moricz also says that overseas investors and developers are exerting an increasing influence on the volume and nature of market activity.
The CBRE report notes that in Auckland, there were 49 sales in the first half of 2014 totalling $865 million which corresponds to 81 per cent of the total New Zealand volume considered. Four properties sold above $50 million, with the largest being Chorus House at 66 Wyndham St ($84 million), followed by Telecom Place building C (sold for $65 million) and the Former BNZ building at 125 Queen St which sold for $57 million to an Australian investor. The second tranche for 205 Queen St has also been realised, resulting in a transaction of $56 million.
“Since the end of June, we have seen the sale of the APP portfolio, the Lumley Building and AECOM House, among many other transactions,” says Moricz.
“Given what is known about the second half of the year, the combined total for the year could be up to and over $3 billion.”
Moricz says that four key trends underpin transaction volumes this year:
- First is the increased activity in the development market. “From virtually nothing a few years back, development land has become the second most actively traded property type in the first half of the year, at 18.3 per cent of the total and valued at $195 million. The demand for development land has been wide spread from overseas developers/land bankers to New Zealand private and corporate institutional entities.
- Second is the significant rise in sales to overseas purchasers, dominated by privates but with institutions also making a big mark. “A key theme here is the activity of private offshore investors. In the second half of this year, the data shows that offshore institutions are also jumping in and becoming highly active.”
- Third is the large part played by local institutions in recycling assets and selling parts of their portfolios as they refocus on development. Listed property trusts and other managed funds sold over $250 million of property in the first half of the year.
- Fourth is some recovery in Wellington and Christchurch transactions, following largely limited recent activity. CBRE recorded nine $5 million plus transactions in the Wellington market totalling $142 million in the first half of 2014.
Moricz says New Zealand is looking very good as an Asia-Pacific investment destination compared to many markets. “The attractiveness of our market combined with the global weight of capital seeking a home has resulted in investors from all over the world - including North America, Europe and Asia - actively looking at our market.”