Hawkes Bay commercial property turnaround

Thursday, 2 February 2017

Hawkes Bay valuer Pat Turley is bullish about Hawkes Bay commercial property as exemplified by this sculpture at the southern entrance to Havelock North.

Retail vacancies in Napier and Hastings have turned around, falling 20 per cent over two years despite increasing supply.

Valuer Pat Turley puts it down to a surging regional economy.

Well-tenanted retail investment properties often sell off-market and are seldom on the market for long, he said.

The falling vacancy rate comes after several years of poor performance.

Good fruit growing and viticulture seasons had insulated the province from poor dairy performances, Turley said.

Consumer confidence was up as evident in Paymark's December retail spending statistics for Hawke's Bay, showing the largest increase of any region, up 11.1 per cent on December 2015.

Also in December last year, the Edgewater Motel on Napier's Marine Parade sold at auction for $3.75 million representing a 6 per cent yield, and attracting close to 50 bids.

The 6 per cent barrier in Hawkes Bay was broken when the SBS Bank in Hastings was sold last year at a 5.63 per cent yield.

The office and industrial sectors' sales and leasing had bounced back in the second half of 2016 to levels not seen since before the 2008 global financial crisis, Turley said.

Hawke's Bay industrial land values were rising but proposed new development land coming on stream supplies was likely to moderate the trend and help contain rents, Turley said.

The office sector has seen extensive developments compared with four years ago. Seismic ratings were an important catalyst for development and values.

But there were few office sale because developments tended to hold onto them, he said.

Rents for new premises have been high but some leases include undisclosed inducements.

The trend of Napier tenants migrating to Nelson's Ahuriri harbour area continues, mirrored to a lesser extent by Hastings tenants migrating to Havelock North.

The price gap was narrowing between good and lesser quality properties which differentiated between location, lease quality, versatility, age and seismic performance.

'This is a classical boom market behaviour,' Turley said.

But he predicted the Hawke Bay economy would continue to drive the commercial property market in the foreseeable future unless there were major external shocks.