Childcare centres, gas stations perform well
Continuing strong demand for welllocated commercial properties with long leases in place has brought in a flurry of childcare centre and petrol station sales this year.
Bayleys has recently sold five fuel stations and the same number of childcare centre properties for in excess of $28 million.
Senior broker Tony Chaudhary, who was involved in nine of the transactions, says investors are being attracted to these two sectors by their typically lengthy tenancy tenures.
Four of the child care centres that he sold had new 15-year leases and four of the fuel stations had 10 to 21 year leases.
“These are much longer lease terms than is the norm for the commercial property market,” says Chaudhary.
“Many of these leases also have fixed annual rental increases, in addition to rent reviews to market, which means they provide assured, steady rental growth. This combined with the length of their lease terms, means they offer the prospect of significant capital growth.
“With the commercial property sector widely recognised as being close to the top of its current upward cycle, properties with leases that stretch for the next decade and beyond are also less likely to be exposed to any downturn in the market over the next few years.”
Chaudhary says petrol stations in particular are generally strongly located, in highly visible positions, often on main arterial roads or easily accessible corner sites, increasing their appeal to investors. Recent service station sales include:
● A new 228sq m service station on a 2028sq m corner site at 1 Corban Ave, Henderson sold for $6,000,000 at a 5.46 per cent yield through Tony Chaudhary, Amy Weng and Janak
Darji, who are based in Bayleys’ Manukau office. It is leased to Z Energy for 21 years from June 2016 with annual CPI rental increases and
10-yearly market reviews.
● A Gull service station and associated Night ‘n Day convenience store on a 3,075sq m site with over
50m of road frontage at 263 East Tamaki Rd, Otara was sold for $4,300,000 at a 5.74 per cent yield by Chaudhary in conjunction with Bayleys’ Terry Kim and Eddie Zhong. A current 10-year lease to Gull NZ runs until February 2026, with rights of renewal to 2046 and annual CPI rent increases.
● A recently opened 228sq m
24-hour fuel station with four pump islands and a retail outlet on a 2466sq m site on Hibiscus Coast Highway, Auckland sold for $6,281,067 at a 5 per cent yield through Chaudhary and Bill Lissington, Bayleys Auckland. It has an initial 18-year lease to Z Energy.
● A Caltex service station on a
1200sq m site on a main arterial road at 248 Welcome Bay Rd, Tauranga sold for $1,350,000 at a 6.21 per cent yield through Chaudhary, Darji and Weng. The tenant has been in occupation since 1995 with a current fiveyear lease from October 2017, plus one five-year right of renewal.
● A 1624sq m site on SH2 at 44 Orchard Rd West, Ngatea with a 96sq m canopy for a fully automated, selfservice Gull fuel station sold for $1,020,000 by Josh Smith, Bayleys Waikato at a 5.66 yield yield. Gull NZ has a 10-year lease plus four five-year rights of renewal.
Chaudhary says the childcare sector in Auckland is popular with investors because it is experiencing record growth, with a surge in demand for places at childcare centres.
“The sector is attractive because of New Zealand’s high childcare participation rate, with the proportion of children enrolled continuing to rise.”
Population growth, particularly in Auckland, will also continue to be a key driver of demand for childcare places, Chaudhary says, although as with all commercial property sectors the balance between supply and demand can get out of kilter at times.
The largest childcare transaction recently concluded by Chaudary and his team of Janak Darji and Amy Weng has been a new purpose-built 511sq m childcare centre on a 1419sq m corner site at 336 Great South Rd, Papakura which sold for $4,057,860 at a 5.99 per cent yield. Consented for 85 children it is occupied by All About Children, with a 15-year lease.
A 221sq m centre, originally a
1960s’ house extended in the 1990s, on a 1012sq m site at 73 Aranui Rd, Mt Wellington sold for $1.805 million at a
5.18 per cent yield. Licensed for 40 children, there is potential to increase this number. It has an eight-year lease from December 2017, with fixed annual rental increases of two percent.
Also, three South Auckland childcare centres with new 15-yearleases were sold for the same vendor by Chaudhary, Darji and Weng at prices ranging from $1.56m-$1.95m, all at 6 per cent yields.