Year-end rally outshines slow opening, sunnier skies ahead
With greater clarity from the new government and its policy objectives, New Zealand’s largest full-service real estate agency says the commercial and industrial sales market wound the year down in a better position than it started.
Bayleys’ national director of commercial and industrial, Ryan Johnson, says transaction data read lower year-on-year as valuers grappled with a shifting economic landscape and purchasers weigh up risk and the cost of debt.
However, the ‘higher for longer’ interest rate rhetoric is losing steam, with local data indicating weaker immediate and mid-term inflation pressures.
“The Reserve Bank’s new remit requires a sole focus on bringing inflation back to 2 per cent, offering a sense that we’re entering a more stable market phase. This is reflected in a number of deals concluded over the back half of the year, indicating growing optimism as we look to 2024.”
One of the most significant industrial sales for Bayleys in 2023 was 12,376sq m of industrial facility in the Tidal Road Airport precinct, which settled for $37.16 million to an established operator in an off-market deal facilitated by Bayleys South Auckland brokers Scott Campbell and Sunil Bhana.
“From its inception, this subdivision has attracted strong demand, reflective of the fundamentals at play in the industrial sector nationwide, where properties suited to largescale use close to main arterials and critical business infrastructure are highly sought-after,” Johnson says.
Another notable transaction in Auckland was the $36.75 million sale of a neighbourhood shopping centre at 22 Stoddard Rd, Mt Roskill, in a deal concluded by Sunil Bhana and Mike Houlker of Bayleys Auckland Central in conjunction with Colliers.
“With a substantial net lettable area fully occupied by some of New Zealand’s best-known brands, the property appealed to a private investor seeking a substantial parcel of land with income and zoning upside in the high-growth south-central suburb.”
Johnson said Bayleys received significant interest when the property was taken through a tender campaign, confirming that wellcapitalised purchasers continue to look through immediate market uncertainties with a view to long-term value capture.
“With a strong emphasis on building performance, the prime inner-city office environment was busy in 2023 as businesses sought new premises that added to environmental, social and governance (ESG) credentials and better serve a more conscious workforce.”
In Central Wellington, two buildings totalling 4813sq m were sold to an international purchaser for $29.346 million in a deal brokered by Mark Hourigan and Grant Young of Bayleys Wellington. The sale included an 11-level office tower which had undergone a $25 million-plus refurbishment earning it a 5-Star Green Design rating and seismic assessment of 100 per cent NBS.
“Another market which continues its postpandemic recovery is the hotel and tourism sector, with a standout sale from Bayleys Hotels, Tourism and Leisure team (HTL) being the freehold going concern for the boutique Nugget Point Hotel at Arthurs Point in Queenstown.
“Brokered by Wayne Keene, Paul Dixon and David Bayley of Bayleys HTL team in Auckland, the property and business sold for $19.575 million to an established Singaporean hotelier, executing a significant refurbishment and expansion of existing room inventory.
“With the market recalibrating in the face of volatility, income growth became a key determinant of property value in 2023, and we saw buoyant leasing conditions for properties across the board.”
In Canterbury, the largest industrial lease for Bayleys was a 25,000sq m facility in Islington’s Waterloo Business Park, brokered in partnership between Scott Campbell and Ash Hira of Bayleys Central Auckland and Nick O’Styke of Bayleys Christchurch.
The successful request for proposal (RFP) resulted in a multi-site deal with global conglomerate Sime Darby, which committed to the 5ha site as its key industrial facility and head office.
In Wellington, seven floors spanning 4000sq m of central commercial office space was leased to Westpac NZ in a transaction brokered by Luke Frecklington and Luke Kershaw of Bayleys Wellington with Bayleys head of Occupier Strategy and Solutions, Steve Rendall.
Echoing trends in the industrial sales market, significant lease transactions in Auckland illustrated persistent growth in the logistics, storage and international shipping sector.
Global logistics giant DHL committed to a 21,000sq m state-of-the-art facility in the Auckland Airport Precinct as part of a multi-site property deal valued around $120 million brokered by Campbell and Bhana.
Another lease transaction found manufacturing occupier Redcorp 13,375sq m of large-format warehousing in the recently completed M20 Business Park in Manukau, negotiated by Greg Hall and Scott Campbell of Bayleys South Auckland.
“These multinational tenants have sought buildings designed to very high and modern specifications when expanding their operations,” Johnson says.
He adds that high-value transactions speak to Bayleys’ ability to deliver despite a challenging market cycle, with business performance invigorated as the agency marked its 50th anniversary in 2023.
“Bayleys’ 50th birthday celebration served as a timely reminder that we have excelled and demonstrated resilience in the face of the most challenging market cycles – which include the stock market crash, global financial crisis and the global pandemic.
“With data suggesting sunnier skies ahead – as further rate tightening is much less likely – we expect 2024 may yield greater stability, which will prove encouraging for investors biding their time on the sidelines over much of the past 18 months,” he says.