Local buyer pays $2 million for the quake-prone retail property at a yield of 1.425 per cent
An iconic Mount Maunganui fish and chip shop has sold for a record low yield, highlighting the ongoing strength of Tauranga’s commercial property market.
The retail property at 80 Maunganui Road attracted frenetic bidding at Colliers International’s final auction in Tauranga for the year.
It sold for $2 million, at a yield of 1.425 per cent, after 70 bids from five parties.
Simon Clark, Managing Director of Colliers Tauranga, says it is the lowest yield on record for a commercial property in Tauranga/Mount Maunganui.
“This is an unprecedented result, even for a market where low yields have become the norm. However, we believe there’s still room for yields to compress even further.
“Strong competition for prime commercial properties is pushing up sale prices and putting pressure on rental yields, even as rents continue to rise.
“This competition is being driven by both local and national investors, who are attracted to Tauranga’s excellent investment fundamentals.
“We’re experiencing strong population growth, a booming regional economy and sustained development activity, all of which is helping to drive up property values.”
Clark points to the latest Colliers International survey, which shows Tauranga/Mount Maunganui is the top spot in the country for commercial property investor confidence.
“We’ve maintained first place since the fourth quarter of 2018, when we eclipsed investment hotspot Queenstown for the first time in almost four years.
“This confidence is reflected in the very strong sales activity we’ve seen this year.”
The recently sold property in Mount Maunganui comprises an 80sq m building on a 94sq m freehold site with commercial zoning. It is tenanted by Mount Fish and Chips, which is a well-known local takeaway shop.
The property was marketed by Colliers International Tauranga Brokers Duncan Woodhouse and Richard Davidson.
Woodhouse says it was sold to a local investor, who now has multiple options to explore.
“The buyer could take advantage of the site’s potential with a multi-level development, or land bank for a future cycle while enjoying holding income from a month by month lease.
“There is also an opportunity to refurbish the property to make the most of demand for retail space on The Mount’s thriving and popular retail strip, which is home to a vast array of eateries as well as local, national and international retailers.”
The building is designated as earthquake prone, with a notice to fix by February 2021.
Clark says that if refurbished, the building could show returns of approximately 2.5 per cent to 3.5 per cent, depending on the final costs and rental achieved
“It is an exceeding low initial return but even with it redeveloped, it is a record low return and shows the strength in this very unique location and low price range.”
Clark says he expects more strong sales results in 2020.
“We’ve had a huge year so far, and there’s no sign of the Tauranga/Mount Maunganui market slowing down in the next 12 months.”