Queenstown’s commercial property sector has performed strongly in 2022 as the demand for land and buildings intensifies amid a lack of supply, according to a recent market analysis by Colliers.
James Valentine, Commercial Sales and Leasing Broker at Colliers Otago, analysed sales and vacancy data from the first half of the year.
“While we have seen commercial yields soften in other regions around New Zealand, Queenstown remains robust,” Valentine says.
“This is underpinned by ongoing interest from buyers, while there is a distinct lack of supply of suitable land and buildings for commercial purposes.
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“There has been no warehouse vacancy across Queenstown since May, which is quite extraordinary and continues to pose challenges for occupiers looking for suitable premises.”
Rental growth through 2020 and 2021 was relatively stagnant as the area was hit hard by the pandemic but as border restrictions loosen and tourists return to the popular hotspot, demand for commercial rental space has grown.
This has seen rental rates spike back to pre-Covid levels recently with small spaces measuring between 100sq m and 300sq m proving particularly popular.
“This demand is predominantly coming from local trade businesses as they look to improve their supply chain efficiencies by pre-ordering materials while needing a base to operate from and handle the increased demand for their services as part of the construction boom of the past couple of years.
“There is no pipeline of built stock, which continues to impact land and rental values meaning yields remain low.”
Looking on a larger scale, tourism operators such as rental car providers are exploring their options but are finding constraints around industrial land supply particularly challenging, Valentine says.
“The tourism sector is set for a major bounce back as visitors return to Queenstown to experience all the region has to offer and yard space is highly sought-after.
“There are two industrial locations currently going through the planning phases for rezoning, the Coneburn industrial area and The Yards in Victoria Flats. The timing for these developments remains unclear, which is proving challenging and will not help supply in the short-term.
“At Coneburn, site clearance and subdivision construction is under way, along with a new roundabout on State Highway 6, which will improve access to the site. The developers are also seeking permission to intensify the industrial zone.”
The recent commercial activity in Queenstown was exemplified by the sale of 19 Margaret Place in Frankton, an industrial property with 967sq m of net lettable area on a 1,112sq m freehold site.
Significant market interest led to a final sale price of $2.9 million at a yield of 4.4 per cent after only two days on the market.
“Demand continues to intensify in Queenstown and the area’s industrial assets remain tightly held while being the asset of choice for buyers as the recovery continues following the worst of the pandemic,” Valentine says.
“Every commercial property we have marketed for sale this year has been sold as buyers have been eager to secure these in-demand assets.”
- Article supplied by Colliers
