Signs of more confidence in commercial property market

In one of the strongest results achieved in a commercial property auction in recent years, Bayleys has sold 25 properties worth close to $22 million.

The properties, which featured in Bayleys’ latest Total Property portfolio, were mostly sold in the agency’s Auckland auction rooms where 18 out of 20 retail outlets that were offered individually in the Rialto Centre in Newmarket and the Pacific Square Retail Plaza in Great South Road, Manukau sold under the hammer.

Chris Bayley, Bayleys Real Estate’s general manager commercial and industrial, said the success of the auction was a sign that more confidence is returning to the commercial and industrial property market, with strong bidding competition resulting in many properties selling at significantly above reserve.

Yields on the Rialto sales ranged from 6.3 percent to 7.8 percent and from 6.5 percent to 9.2 percent for Pacific Square. Most of these sales were to local Chinese, Korean and Indian investors, although Bayleys’ James Chan, who managed the Rialto sales, said one telephone bidder from Singapore bid on all of the Rialto offerings and ended up buying three of them.

Rialto prices ranged from $128,000 (7.1 percent yield) for a 24 square metre hairdressing salon to $2.965 million (7 percent yield) for the Eurostyle Menswear store on Broadway, Newmarket and $3 million (7.8 percent) yield for a Homestore shop on the ground floor of the centre. The lowest yield of 6.3 percent was achieved for a 100 square metre corner shop on Osborne Street which sold for $975,000. It has a six-year lease form October 2008 to TS14+, a fashion brand for larger women with more than 100 stores throughout Australasia.

Another property in the Rialto Centre occupied by ANZ Bank also sold by tender for $5,860,000 at a 7 percent yield. The 785 square metre two-level premises which have a substantial frontage to Broadway sold with a six-year lease to the bank from January 2008.

Nine out of 10 units offered in the Pacific Square Retail Plaza, a neighbourhood retail convenience centre next to the Pacific Events Centre in Manukau, also sold under the hammer at the Total Property auction. They had a mixture of national and local tenants, with those with national tenants attracting the strongest bidding and lowest yields.

A Domino’s pizza outlet sold for $630,000 and a Subway outlet for $545,000, both at 6.5 percent yields, a Jesters Pies shop in corner position went for $400,000 at a 7.1 percent yield and Super Liquor premises sold for $800,000 at a 7.3 percent yield. The largest sale was $2,051,000 for a Lonestar restaurant and bar at entrance to the plaza which sold at a 7.9 percent yield

Bayleys commercial manager Robert Platt said the success of the auction underlined both the demand for, and shortage of, good investment offerings, particularly in the sub $1 million category.

“I think there is a message here to property owners who do have quality stock, and are considering selling, that now is a good time to be doing so because of a lack of competition from other offerings in the market. The auction also showed that there is an increasing depth of buyers and unsatisfied demand for property that ticks investors’ boxes.”

However, Mr Chan cautioned that investors remain very selective. “They want a strong location and a good tenant and it remains challenging to sell anything that doesn’t fit into that category.”