Yields tighten for well-located commercial property
A continuing contraction of investment property yields and a good level of demand for well-located tenanted and vacant premises were features of Bayleys’ final Total Property auction for the year.
Bayleys’ Auckland commercial and industrial director Lloyd Budd said the sale of a variety of tenanted offerings at net rental income returns of below or around 5 per cent confirmed yields were continuing to track interest rates down.
“Bank deposit rates have dropped significantly in recent months to below 1 per cent which opened up a bigger yield gap with commercial property returns than has existed for some time. However, our latest auction results show that property yields are now also adjusting downwards again, and this may well continue into the New Year,” Budd said.
“The auctions showed we are also returning to more of a two-tier market where strongly located properties are generating most interest while those that are not so well-positioned are finding it harder to attract investors.”
The highest priced property to sell also produced the lowest yield. The 743sqm building on a 764sqm site at 14 Clyde Rd in Browns Bay sold for $4.201 million at a 4.65 per cent yield.
The property has an eight-year lease from February 2018 to the Huckleberry Farm organic grocer with fixed rental increases of 2.75 per cent.
Rajan Unka, who marketed the property, said the purchaser was a neighbouring owner who saw long-term strategic value in owning this property in a prime position in the sought-after and tightly held Browns Bay town centre.
A multi-tenanted retail premises on a site with mixed-use development options in Glen Innes town centre sold for $1.340m at 4.72 per cent yield. The 153sqm singlestorey, standalone building is on 164sqm of land at 149-151 Line Rd. The site’s Town Centre zoning allows for a maximum possible building height of 32.5 metres and offers future intensive development potential as part of the Tamaki Regeneration’s 20-year project to revitalise the Glen Innes town centre.
Other Auckland investment properties to sell at auction included:
• A 400sqm, two-level unit-titled property at 250 Mahurangi East Rd, Snells Beach. $1.45 million at a 5.53 per cent yield.
• A refurbished 100sqm retail unit with four car parks at 2020 Great North Rd, Avondale. $701,000 at a 4.75 per cent yield.
• An 868sqm industrial building on a
1320sqm corner site at 18-20 Keeling Rd, Henderson. $1,880,000 at a 6.12% yield on a new six-year lease
• A 446sqm two-level commercial building on a 481sqm site at 35-39 King St, Pukekohe. $1.91 million at a 5.07 per cent yield.
Budd said vacant buildings continued to attract interest from owner occupiers, particularly those who can debt fund the purchase of premises at a lower cost than renting.
“They are also attracting attention from more entrepreneurial investors who are prepared to take a punt on finding a tenant in anticipation of receiving a better income return than if they had bought it already leased.”
Four vacant properties also sold at the Bayleys’ Auckland auctions ranging in price from $540,000 for a 232sqm industrial unit in Henderson to $1.19 million for a
242sqm strata titled office floor at 128 Broadway, Newmarket.