Recent commercial office building sale along with Colliers International Survey show investor confidence in Hawke's Bay market
The $10.4 million sale of a prime Hastings commercial property is thought to be the largest Hawke’s Bay office transaction in a decade.
The multi-tenanted property at 100 McLeod Street, which is anchored by the Hawke’s Bay District Health Board, was recently sold by Colliers International Broker Danny Blair for a yield of 7.1 per cent.
The property was purchased in an off-market transaction from an investor who had renegotiated a long-term lease with the anchor tenant.
Blair says the price and yield achieved is a testament to the desirability of Hawke’s Bay commercial real estate.
That assessment is backed up by the latest Colliers International confidence survey, which found more investors are optimistic about the region’s market performance than in almost a decade.
A net positive 16 per cent of respondents expect conditions in the Hawke’s Bay commercial property sector to improve over the next 12 months – the second-highest result since the survey began in 2008.
Blair says that while the McLeod Street deal is significant, it is far from unexpected in the current climate.
“There’s overwhelming evidence that Hawke’s Bay is now firmly on the radar of national property investors, and increasingly on the radar of international investors too,” he says.
“The McLeod Street property was sold by an out-of-town vendor to an out-of-town buyer, and recent sales and strong national enquiry show this pattern is becoming very much the norm.”
Recent CoreLogic sales data analysed by Colliers shows total commercial property sales in the first quarter of 2018 reached just over $47 million. That will likely increase to $55m once reporting data catches up.
The industrial sector accounted for most of the transactions, but bolstering overall sales activity this year has been solid turnover in the office, retail and commercial mixed-use sectors.
Non-industrial commercial property transactions accounted for 41 per cent of the commercial sales value and 46 per cent of total sales activity so far this year.
Office and retail buildings are attracting regionally strong yields of between 6-7 per cent at the top end of the market, and up to 10 per cent depending on location, quality and covenant.
Blair says the recently sold property at 100 McLeod Street is very much at the premium end of the market.
“Built in 2004, the 4,040sq m office complex is strategically located only 200m from Hastings Memorial Hospital, the main hospital in Hawke’s Bay.
“It is also only 100m from the Stortford Lodge roundabout, which is a major access point to Hastings’ main arterial routes, making it one of the most convenient and accessible places in the city.”
The property offers 103 on-site car parks alongside some of the most efficient office accommodation in Hastings.
It comprises two small office units on the ground floor while the top floor, anchored by Hawke’s Bay DHB, enjoys sweeping 360-degree views.
The $10.4m sale was the largest office transaction on record in Hawke’s Bay since 180 Dalton Street, Napier South, sold for $11.04m in 2005.
Other significant Hawke’s Bay commercial property transactions brokered by Blair within the last month include:
200 Market Street, Hastings – a 3,640sq m retail and office property, predominantly leased to Kiwibank, which sold to an out-of-town investor for $7,085,740, representing a yield of 6.13 per cent;
1026 Heretaunga Street West, Hastings – a 456sq m retail unit with 19 on-site car parks, leased to ANZ Bank, which sold off-market for $1,805,000, representing a yield of 6.06 per cent, and;
822 Omahu Road, Hastings – a brand new 510sq m industrial development, leased to engineering supplies company SaecoWilson, which sold by negotiation for $1,460,000, representing a yield of 6.5 per cent.
Chris Dibble, Director of Research and Communications at Colliers, says the Reserve Bank of New Zealand’s latest monetary policy statement bodes well for the Hawke’s Bay property market.
“The bank’s signalling that the OCR will remain accommodative for as long as necessary will likely boost further commercial and property investment as purchasers search for higher returns in a low-interest rate environment, especially in locations with solid underlying fundamentals like Hawke’s Bay.
“Data from Statistics New Zealand shows rises in population, GDP, employment, the number of businesses, agricultural outputs, construction activity, household income and retail spending in Hawke’s Bay, all of which has been filtering through to boost confidence.
“Not only has the array of positive indicators translated into high sales turnover, but it has supported leasing activity in the region.”
Dibble says the number and growth of employees signals greater demand.
The latest Ministry of Business, Innovation and Employment forecasts for Hawke’s Bay show growth of over 5 per cent in the skilled and highly skilled employment categories in the next four years.
“Although there is some capacity in the market to absorb this growth, more space will likely be required,” says Dibble.
“The latest commercial and industrial consent activity for Hawke’s Bay shows total floor space of 6,254sq m with a projected value of $25 million.
“This is the strongest level of development appetite since mid-2016, with further consent applications likely over the remainder of 2018.
“Given construction sector capacity constraints, development activity will be measured, bolstering demand for the high-quality premises that are currently available.”