Housing boom reflected in commercial market
CBRE has concluded the sale of three major central Christchurch development sites in a month, with a combined sale price of around $30 million and a total land area of
16,000sq m.
The sales, concluded during May and June 2021, were the former All Seasons Hotel site at 60-72 Papanui Rd and 51 Onslow St (opposite St Margaret’s College); the former Cranmer Centre site at 32 Armagh St; and the former Shangri La restaurant site at 71 Kilmore St.
The sales illustrate the high demand for development land, as developers seek to secure sites in response to the strong housing market as well as increased demand in the commercial market.
71 Kilmore St, a prime corner block bordering Durham and Kilmore streets opposite Christchurch Town Hall, was sold to a commercial owneroccupier while the former hotel site sold to a residential developer. The Cranmer Centre sale details are confidential at this stage.
Bonnie Stone, sales director at CBRE, says the purchaser of 71 Kilmore St is a business operating in the property sector. It had searched unsuccessfully for an existing central city office building to buy for nearly a year before shifting focus to building its own.
It plans to construct a mixed-use development, including an office for their own business in conjunction with residential development. “With borrowing costs so low, many business owners who have sufficient equity prefer to own their own office than rent in the current environment. Commercial owner-occupiers can also reap the benefit of potential longterm capital growth of their asset.”
Unprecedented demand for land for residential development is putting further competitive pressure on welllocated development sites, says Cameron Darby, senior investment sales broker at CBRE, who was involved in the Papanui Rd and Cranmer Centre sales.
“The strong housing market is resulting in residential developers enjoying good success rates selling new homes off plans, demonstrating that there is plenty of demand for good-quality townhouses and apartments in the central city.
“As a result of this, the availability of substantially-sized vacant sites for development in the Christchurch central city is now becoming quite restricted, which will put further pressure on land values,” he says.
CBRE’s most recent office outlook confirms a trend towards reducing CBD office vacancy and predicts a more positive outlook for the office market.
With office vacancy rates reducing in the central city and development sites predominantly being absorbed for residential development, office buildings and commercial development land are under increased demand and becoming more difficult for purchasers to acquire.