The attraction of commercial property in a low interest rate environment has been demonstrated in strong transaction volumes in New Zealand for the first half of 2021, according to CBRE New Zealand’s latest Transaction Monitor research released today.
This comes as CBRE NZ’s Executive Director of Research says that the latest lockdown has lessened pressure to lift interest rates, with property pricing likely to stay strong over the next 18 months.
The research reveals 119 transactions of properties of $5million+ in value, the equal highest number recorded for the first half of any year on record.
In terms of total transaction value, the H1 aggregate sales value has only been surpassed in the first half of a year on two previous occasions, in 2018 and 2016, which were underpinned by major portfolio sales (2016 Oyster purchases in Greenlane valued at $210 million, and VXV at $635 million).
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The latest report also highlights that:
-Office sales lead the New Zealand market, closely followed by industrial. The top three largest sales above $100 million were office assets (a half-share in ANZ Centre at 23-29 Albert Street sold to a Singapore managed fund for $177 million, 46 Sale Street sold to Stride Property for $152 million and 12-16 Nicholls Lane sold for $110 million)
-The largest industrial sale was 44 Noel Burnside Road in Wiri, Auckland, which was sold to Property For Industry for $92 million.
-H1 2021 has been a buoyant period for vacant land/development sites, making up 14% of all sales ($304 million), well above the last three-year average.
-Overall investment activity is dominated by private buyers (52), followed by institutions (34) and syndicates (7). Private investors were net sellers, while institutions and syndicates were net buyers.
-Singapore-based investors were the most active of the offshore investor groups, with a smaller proportion of investment by Malaysian and Australian buyers.
Zoltan Moricz, Executive Director of Research for CBRE New Zealand, says: “The latest data shows a robust market in action, underscoring the attraction of commercial property for investors in a low interest rate environment; continuing to provide attractive returns and capital appreciation.
"This is backed up by the jump in numbers of $5m-$10m sales in the first half of the year, which is partly due to capital appreciation as properties cross the $5m+ threshold. We saw 69 transactions in the $5-$10 million price bracket against the ten-year average of 43.
“Looking ahead, the latest lockdown has lessened pressure to lift interest rates. We therefore expect a gentler rates curve. Accordingly, we anticipate that property pricing will stay stronger for longer over the next 18 months or so.”
Brent McGregor, Executive Chairman of CBRE NZ, says: “With borders closed, there were far fewer assets selling to offshore groups. However, the overall transaction numbers and total sales volumes indicate a very strong local investor and banking environment.”
Around New Zealand:
Auckland saw 91 sales in the first half of 2021, totalling $1.83 billion (82% of the overall sales volume). Within this nine transactions were above $50million, totalling $908 million.
43 industrial assets sold for a total of $569 million: 16 office buildings for $652 million, 14 retail investments sold for $190 million, 8 development sites sold for $270 million,4 retirement villages for $84 million, and 1 hotel sold for $7 million.
Wellington activity saw 15 transactions over $5 million, totalling $275 million. Of this, six office transactions totalled $174 million, two retail investments at $44 million and four industrial assets for $39 million.
The largest sale was 1 Bowen Street (Bowen House), which was sold to Precinct Properties for $92 million. This was followed by 20 Aitken street which sold for $49 million, also to Precinct Properties. The third largest sale was 45 Jackson Street, a Countdown supermarket anchored retail property sold by a local syndicator to Investore Property for $37 million.
Matthew St Amand, Managing Director of CBRE in Wellington, says: “Institutional buyers of office assets recognise the value and stability that Wellington offers, underpinning transaction volumes in our market.
"Similarly to the second half of last year, office sales have again dominated the market as institutional purchasers such as Precinct have been active. Industrial sales activity was also above its long-term average, demonstrating the value, record low vacancy rates and projected rental growth on offer.”
Christchurch investment activity was dominated by New Zealand based private (74%) and syndicate investors (26%) over the period. Transaction volumes totalled $126 million, with 13 properties changing ownership in the first half of 2021.
Four industrial sales totalled $30 million, three office sales $45 million, and three development sites $29 million. The largest sale was 229 Tuam Street, sold by a private investor for $33 million to Oyster. This was followed by two large land sales, 60-72 Papanui Road & 51 Onslow Street and 32 Armagh Street, for $12 and $11 million respectively.
Tim Rookes, Managing Director of CBRE Christchurch, says: “Christchurch’s positive commercial real estate story continues. It is pleasing to see the strong performance of the Christchurch property market continuing, particularly in the office sector, which is strong due to a combination of high-quality stock, national yield compression and less structural workplace changes. Christchurch rightly continues to draw investment interest.”
- Article supplied by CBRE
