Yield hunters fuel commercial property market
Falling interest rates are continuing to fuel the commercial property market with 10 of 11 properties selling at Bayleys’ latest Total Property portfolio auction in Auckland.
The sales totaling over $15 million comprised two childcare centres plus a range of other commercial, industrial and retail transactions across Auckland and included close to $4 million of commercial sales in the massive SugarTree residential complex at 145 Nelson St in Auckland’s CBD.
Bayleys Auckland commercial and industrial director Lloyd Budd says the properties sold at a price range of $690,000 to just over $3 million and at income yields of between 4.24 and 7.43 per cent.
“These yields are considerably higher than what can be achieved on bank deposits and are generally better than income returns on Auckland residential property which is continuing to drive demand for commercial property.
“The auction was held just before last week’s larger than expected drop in the Official Cash Rate (OCR) which is likely to add further momentum to the commercial property market as investors go yield hunting. This was reinforced by the fact that two properties sold post auction relatively quickly after the half percentage point drop was announced.”
The largest transaction completed was for the SugarTree Lane Preschool centre, a new 659sq m commercial indoor and outdoor unit titled property with an initial 15-year lease until 2033 plus three further five-year rights of renewal.
A sale was negotiated by Bayleys’ senior brokers Damien Bullick, James Chan and Tony Chaudhary shortly after the auction for $3.01 million at a 7.43 per cent yield after it was bid up to $2.65 million and then passed in on a vendor bid at $2.7 million.
Selling under the hammer for $1.69 million at a 5.33 per cent yield through Michael Nees, Tony Chaudhary and Amy Weng was another childcare centre at 12 Lockett Rd, Glenfield. Located on a 751sq m corner site zoned Mixed Housing Urban, the 110sq m centre established in 1989 in a single-level converted bungalow is licensed for 40 children. Occupant Educare Kids’ current lease runs to 2034 with two further 10-year rights of renewal.
Also sold in the Sugar Tree complex by Bullick, Chan and Philip Haydock were a 56m sq m convenience store with an initial six-year lease which sold under the hammer for $500,000 at a 7.1 per cent yield and 43.2sq m cafe´ on a five-year lease which sold post auction for $426,000 at a 7.39 per cent yield
Bullick says the units are located at street level within the SugarTree apartment precinct, on a laneway connecting Union St to Nelson St. “Currently consisting of three residential towers, the development will shortly be home to approximately 2000 residents,” he says.
The only offering so far not to sell after being passed in at the auction is a vacant SugarTree unit with a 110sq m floor area plus 44sq m external deck which is fully fitted out as a bar and restaurant. Chan says it would be ideally suited to an owner occupier.
The auction’s lowest yield of 4.24 per cent was achieved on a New Lynn car sales yard at 3021-3023 Great North Rd marketed by James Were, Scott Kirk and George Yeoman. Were says the yield on its lease to a used car dealership reflected the development
potential of the underutilised 1294sq m site which is in two titles and is zoned General Business. The site has substantial frontage to the major arterial road and is less than 100m from Kiwi Property Group’s Lynnmall shopping complex.
The land sale price of $1731 per sq m is a jump up on the $1087 per sq m achieved in October last year for another nearby caryard site on the opposite side of the street at 3010 Great North Rd which was marketed by Bayleys in a Total Property tender campaign. The larger 2782 sq m site sold for $3,023,854 at a 5.5per cent yield on its lease to Buy Right Cars.