Northland and Auckland 2014 commercial property market in review

High levels of business and consumer confidence, a favourable lending environment and the resurgence of development fundamentals have fuelled an active and positive year for the New Zealand commercial and industrial property market according to leading sales agency, Bayleys.

Dynamics vary region by region and so, in the first of a three-part series, Bayleys’ regional commercial managers analyse their markets.

Northland
Office, retail, and industrial rental values have all been stable as have leasing activity levels and investment yields in the Northland market.

Bayleys in the North director Mark Macky says although the leasing markets in all sectors have been subdued in Northland for some time, the value-for-money opportunity inherent in the market is enticing new activity.

Whangarei is still the hub of the Northland economy and, relative to the rest of the country, the commercial and industrial sectors are undervalued, Mr Macky says. 

“For those businesses able to operate away from major centres, opportunity knocks.

“As infrastructure projects progress, the gap between Northland and Auckland will begin to close – it’s only a matter of time,” he says.

Rodney
Office and industrial rental values have increased, retail rental values have been stable or increasingly dependent on location and leasing activity levels have risen across the Rodney region, according to Mr Macky.

“New office developments coming on line in the Silverdale area along with future initiatives based on identified growth areas in the proposed unitary plan for Rodney, are encouraging positivity and confidence,” Mr Macky says.

“As the Proposed Unitary Plan is rolled out, Silverdale and Warkworth will become even more sought-after.”

Meanwhile, leasing activity is on the rise and investment yields are firming as Rodney leverages off the buoyant Auckland market.

“The motorway extension linking Puhoi to Warkworth is progressing, which is good news for the Rodney and Northland regions. Under the proposed Auckland unitary plan, Hibiscus Coast and Warkworth are set to grow significantly in years to come and commercial and industrial investors are seeing the potential this offers,” Mr Macky says.

North Shore
Office and strip retail rentals have been stable, while bulk retail and industrial rental values have increased on the North Shore.

Bayleys North Shore sales and leasing director Daryl Devereux says leasing activity levels have increased across the board and investment yields have remained low.

“Office rental growth is slow on the back of an over-supply from three years ago and vacancy rates have fallen from 14% to 6-7%,” Mr Devereux says.

“Availability in the bulk retail market is tightening as new development opportunities become few and far between and tenants are faced with making strategic decisions about location. 

“In the industrial leasing market, there has been an all-time low vacancy of 3% for over 12 months now and incentives for tenants have just about disappeared.”

Mr Devereux says the North Shore has very little future development land available, with the majority of opportunities now in Hobsonville and Silverdale.

“We will inevitably lose some tenants to the other side of the Harbour Bridge. This will be positive in the short term for investment capital values and rental growth. However, in the long term, the North Shore is in danger of being unable to accommodate growing businesses in certain sectors.”

Auckland Central
Bayleys national director commercial, John Church, says office rental values have increased in the CBD but remain stable in city fringe locations. 

“Activity has increased in the Auckland office sector, with very few vacancies in the CBD and landlords tightening the incentives offered. New developments such as the Manson project in Victoria St and Goodman’s Fanshawe St development due for completion in 2015/16 will provide much needed supply,” Mr Church says. 

Retail rental values have also been stable across the central Auckland market while industrial rental values have risen.

“There is a polarisation between prime and secondary retail stock and shopping centre vacancy is slightly higher this year than last according to Bayleys’ research data,” says Mr Church, adding that bulk retail has fared well with minimal vacancy.

Vacancy rates within Auckland’s leading industrial precincts – including the airport corridor, Penrose, Mt Wellington and Rosebank Road – have fallen in the last year. 

Investment yields have held up very well across all sectors and there is still demand for secondary stock with buyers taking into account risk and spending accordingly. 

There has been a significant lift in sales in the $5-10 million price bracket, which shows buyers see value in the sector.

South Auckland
Office rental values have increased for A-grade stock and remained stable for B-grade stock in the South Auckland region according to Bayleys South Auckland commercial and industrial manager and the company’s international director, Chris Bayley.

“In the retail sector, strip retail rental rates have increased and retail vacancy generally has remained low at near 3%,” said Mr Bayley.

Industrial rental values have increased, with a lack of stock resulting in unprecedented demand from tenants, with many forced to look outside their preferred area to secure premises.

Investment yields have been strong and well-leased industrial properties are selling quickly, with robust investor demand in all price ranges including up to $10 million.

“Owner/occupiers keen to secure their future are paying record prices for industrial properties,” Mr Bayley says. 

The Auckland Manukau Eastern Transport Initiative (AMETI), which is now under way, will streamline traffic infrastructure, encourage linkages between industries, and support growth across South East Auckland. 

See part 1 here - Northland and Auckland 2014 commercial property market in review

See part 2 here - Central and lower North Island’s commercial property reviewed

See part 3 here - South Island commercial, industrial market shows resilience and growth

Jody Robb writes for Bayleys Real Estate