Despite higher interest rates and a cooling national economy, Canterbury's commercial property market continued to perform strongly in 2022, Colliers says.
Key property fundamentals supported the market, with another solid performance predicted this year.
Mark Macauley, general manager of Colliers Christchurch, says the local market has been a hive of activity in recent years, fuelled by low interest rates, record low office and retail vacancy in the inner city, a burgeoning transport and logistics sector, and diminishing supply of industrial land.
Last year was marked by several significant Christchurch transactions, including:
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• Northlands Mall, $160 million
• Countdown’s new distribution facility at Rolleston in a 15-year sale and leaseback with the total project cost reported at $99 million
• A healthcare building in Saint Asaph Street, $52 million
• A $50 million industrial portfolio
• YHA portfolio sale, reported at approximately $60 million
These and other large sales were predominantly to private investors, syndicators, and property funds.
Despite rising interest rates and prevailing economic uncertainty, Macauley is still optimistic about the year ahead.
“The headwinds of rising interest rates are being countered by rental growth and low vacancy levels across all sectors of the market. With growing consensus that we may have hit the inflation peak, we’re seeing more confidence from investors looking to invest,” Macauley says.
“I’m hugely confident about Canterbury’s ongoing growth over the next 10 years as the city blueprint, created following the earthquakes, really starts to bear fruit and we see many of the anchor projects up and running or under construction.
"CBD residential in the Four Avenues is taking hold, looking great and lifting the vibe of the central city.
“Christchurch is regarded as a highly desirable place to live and work; the city is easy to get around now that all the roading networks are complete, and there’s a supply of modern and affordable housing stock. It’s no surprise that we are seeing businesses and families relocating to Christchurch.
“The CBD is far more vibrant than it’s been in a long time, people are back working in the city with the working from home phenomenon far less prevalent here than in Auckland or Wellington.”
CBD office vacancy is at its lowest since Colliers began surveying the market in 1993 and businesses are vying for what little space remains.
Significant new office builds are under way to meet demand.
Anthony Leighs now has the go-ahead to start construction on his high-end $30 million building in High Street, which only has one floor remaining while site works have begun on the Carter Group’s retail and office building in Cathedral Square.
Added to those offerings, the structurally upgraded and refurbished former Design and Arts College brings a sought-after unique heritage offering with total net lettable area of 5,374sq m.
CBD retail in Christchurch has never had it better, Macauley says, with slim pickings for national and international retailers searching for premises fronting onto the Cashel Mall precinct with demand outstripping supply.
For instance, Peebles Group’s new office and retail block opposite Riverside Market has attracted a Nike flagship store, together with lifestyle and adventure outdoor apparel brand Helly Hansen signing its first New Zealand store.
High-end home appliance brand Miele is establishing a CBD showroom, and fashion and design boutique Seletti opened pre-Christmas.
Funlab opened its Archie Brothers Cirque Electriq and Holey Moley Golf Club in EntX last October, which has proved extremely popular, while Timezone is opening in the Terrace hospitality precinct.
The Christchurch industrial market has gone from strength to strength with extremely low vacancy and strong demand for existing stock when it becomes available according to Sam Staite, director of industrial at Colliers Christchurch.
“Historically, Christchurch has been considered to have endless amounts of land supply but that’s changed drastically over the past two years. Things are very tight,” Staite says.
“If you came to the market today wanting to purchase industrial land, you would have very limited options, and this is unlikely to change in the medium to long term.
“Land rates have increased to between approximately $300-$450 per square metre but that’s still exceptionally cheap compared to the rest of New Zealand’s major centres. These affordable land rates result in lower rents, and this is why Christchurch is so compelling as a distribution hub.
“General sentiment is that we’re starting to see the end of supply chain issues, fuel costs are coming back, and employment restrictions are easing for overseas workers.”
Meanwhile, appetite for value-add properties shows no sign of abating. A prime example is a high-profile property on the corner of Shands Road and Halswell Junction Road that was keenly contested, resulting in seven offers, of which four were unconditional.
Macauley says these combined factors indicate immense confidence in Canterbury.
“Yes, things are going to be challenging throughout 2023 but the commercial property market is in a strong position.
“We know that savvy investors still see plenty of buying opportunities out there and know that it’s a good time to buy. Long-term, commercial property owners will see opportunities in this market throughout the next year and will act accordingly. If the right deal is there, they will be in.”
- Article supplied by Colliers
