Industrial returns lure investors south
German-owned T&G Global has put its big Christchurch distribution centre up for sale, with real estate agents predicting Auckland investor interest because of better returns in the south.
T&G Global, which is listed on the New Zealand sharemarket and was formerly known as Turners & Growers, will lease back the Dakota Crescent distribution centre, near the Christchurch International Airport, from the new owners.
The property comprises warehousing, cool and cold storage, a central freight tunnel, and offices and amenities in a building of 8100 square metres.
It has a capital value of $8.6 million, comprising $5.6m for improvements and $3m for the land of 1.819 hectares, zoned heavy industrial, on which the building stands.
T&G Global wanted to free up cash from the sale for further business expansion, said Sam Staite, the director of industrial sales and leasing at Colliers International in Christchurch.
T&G Global was committing to a new 12-year lease with fixed rental increases.
Staite said there had been marked interest in Christchurch industrial property in the past eight months from Auckland investors seeking quality investment stock.
‘‘We’ve seen national investors increasingly turn their focus to the Christchurch industrial market, because it’s perceived to offer better investment returns than in Auckland.’’
There had already been substantial interest from Auckland investors in the T&G Global Dakota Crescent property. Auckland was a hot market where quality investments were hard to come by, he said.
The two markets were quite different. Canterbury had a strong agricultural outlook that fed directly into the industrial sector.
Auckland was more geared to consumption and distribution for the high population base, while Christchurch property was more about servicing the export and production sectors.
Staite said a recent off-market campaign for a large industrial asset in Christchurch had attracted multiple offers, all from parties outside Christchurch. The property was now under contract.
Earlier in the year an Aucklandbased syndicator bought Metro Glass at 704 Halswell Junction Rd for $18.6m, and another Hornby site at 55 Lunns Rd for $12.94m.
Colliers’ Capital Markets Investment Review 2017-18 – Industrial shows lower industrial property Sam Staite, Colliers International prices and higher returns in Christchurch compared with Auckland.
The report states average returns of 5.5 per cent in Auckland compared with 6.55 per cent in Christchurch in the second quarter of 2018, both returns representing a fall of 0.28 percentage points from a year earlier.
Christchurch industrial values were rising at a slower pace than Auckland’s tight market. Christchurch industrial values were $1865 per sqm, up 4.2 per cent from a year earlier, while Auckland industrial values were $2781/sqm, up 9.6 per cent on a year earlier.
Average industrial rents per sqm in Christchurch were $122, the same as the year before, compared with Auckland’s $150, up 4.7 per cent.
Colliers said the year to June 2018 had been a strong one for industrial property and that was expected to continue for the next 12 months.
The rapid increase in land values had limited the feasibility of further supply; however, consents data suggested more industrial building supply was coming, particularly in Auckland where a wave of speculative builds would be completed by the end of 2018.
‘‘We’ve seen national investors increasingly turn their focus to the Christchurch industrial market, because it’s perceived to offer better investment returns than in Auckland.’’