The small number of commercial properties changing hands in central Queenstown is making it difficult to benchmark where values now lie.
Geoff McElrea, a specialist valuers at Colliers International in Queenstown, said the only deals in the past 12 months had been in fringe locations, showing yields of 6%-7.5%.
“But there has been some anecdotal evidence suggesting a softening of prime commercial property yields. They’ve certainly eased from their heights of the market peak in 2007/2008, when our yields were among the lowest in New Zealand at around 4% - 5.5%, while commercial retail rentals rose to $1000m2 - $1500m2.
As always, commercial property in the town centre continued to be tightly held, with the majority of property owners high net wealth individuals.
Rentals within the prime sector of the commercial market remained firm, primarily due to low vacancy and strong demand coming from new entrants underpinning the market, McElrea said.
“A number of Australian retailers have targeted Queenstown as a destination and this has ensured that demand for space remains high, with recent leasings showing rents of around $1000m2.
“Secondary and fringe retail locations have not been so resilient with a number of buildings experiencing long periods of vacancy and weaker rentals primarily because they are located away from the beaten tourist path plus the additional supply of space available.”
Central Queenstown had seen a substantial increase in commercial developments over the past two years, with the majority nearly completed. They include:
Post Office Precinct 7476m² total development since 2005
· The Mountaineer 4355m² · Church St Development 4052m² · Rees & Beach St Corner 1400m² · Shotover Street Plaza 260m² Total 17,303m²
McElrea estimated the collective total build cost was about $150 million.
“These developments have added to the growing number of high quality buildings within the town but have prompted a softening in both office rents and, to a lesser degree, retail rents.
“The office leasing market has softened as a result of the increase in new ‘A’ grade supply. A number of leasing incentives are being offered to new tenants including contributions towards tenancy fitouts and discounted initial rents.”
There had also been significant new commercial developments in nearby Frankton, which was emerging as a second town centre. Collectively the estimated total build cost of recent significant new developments was in the region of $25 million.
The Remarkables Park had cemented itself as Queenstown’s primary large format shopping destination while a buyer has yet to be announced for Five Mile.
For further information, please contact:
Geoff McElrea 03... geoff.mcelrea@colliers.com - 0275779607
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