Fashion capital retail sites back in vogue for commercial property investors

Well located commercial properties continue to attract strong interest from investors - with Bayleys selling close to $30 million worth of adjoining properties located in a prime position on Broadway in the heart of Newmarket’s retail precinct in Auckland.

The agency put seven strata titled shops in the Rialto Centre up for auction as part of its latest Total Property and sold the lot, with fierce bidding competition seeing all selling under the hammer at an average yield of 6.2%.

Bayleys’ international sales director James Chan, who managed the sale of the units on behalf of Ladstone Developments Limited, says most of the bidding was from local and offshore Asian interests. One purchaser travelled from China and bid on several of the properties and there were phone bidders from Hong Kong and Singapore.

Chan and Paul Hain, from Bayleys Auckland office, have also sold the neighbouring property, the National Bank building at 187-193 Broadway, to an investment company from Guangzhou, China, for $13.5 million at a 7.8% yield. The bank provides close to 60% of the property’s income

“The purchaser had been looking to invest in New Zealand for some time and once the type of property they were after presented itself they moved very quickly to secure it,” says Chan.

Chan says that as New Zealand’s business relationship with China strengthens on the back of the free trade agreement between the two countries, Chinese investment in this country will also inevitably increase.

“At the moment the high New Zealand dollar is constraining foreign interest in our commercial property market, but longer term we expect China to become a significant source of offshore investment interest in New Zealand property. For this reason, Bayleys will continue to focus on maintaining and building relationships within the Asian region.”

The seven auction properties in the Rialto, mostly leased by fashion retailers, were sold at prices ranging from $366,000 to $2.418 million. Another unit, previously occupied by Max Fashions, was sold prior to auction for $3.2 million, giving a total value of Rialto units sold so far of $13.3 million. Chan has another three larger Rialto properties, including the Rialto cinema, up for tender closing this week and he says there has been strong interest in these as well.

He says the properties’ location in the heart of the Newmarket retail precinct, in the heaviest pedestrian traffic area on the sought after western side of Broadway, was the main attraction for investors. Chan says the property market downturn has had little effect on yields on smaller to medium sized retail offerings in prime locations and these type of properties continue to be keenly sought after by investors.

The lowest yield of 5.2 percent at the Rialto auction was for smallest offering, a 25 sq m unit at the rear of the centre on the newly developed Osborne boutique retail strip. Occupied by specialist fashion retailer The Pyjama Co on a three-year lease, it attracted fierce competition from three bidders on the phone as well as several on the auction floor, with a number of $1,000 bid increases pushing it up to its final sale price $366,000.

Also attracting big bidding and selling for $2.23 million at a 5.3% yield was a Broadway outlet with a new six-year lease to optical retailer Specsavers and fixed rental growth of 2.5% per annum. It was declared “on the market” at just under $2 million.

Chan says more of the 25 shops in the Rialto will be auctioned this summer, with the timing of this campaign to be announced shortly.

Eight other offerings in the Auckland Total Property auction also attracted good interest, either selling prior to auction or on the auction floor. These include a Kiwibank/NZ Post outlet in the Westgate Shopping Centre, with a new 9-year lease with annual CPI rent reviews, which sold prior for $1.55 million at 6.35% yield.