New consent volumes fall, but project values on the rise in 2015
Christchurch, 3 May 2016 – The industrial sector led the way for Canterbury commercial property market in 2015, with transactions above $5m doubling and the value of sales increasing threefold, according to CBRE New Zealand’s latest Christchurch MarketView.
Tim Wiles, Research Manager for CBRE New Zealand, says that industrial was a standout performer for the Canterbury market last year, in addition to strong retail sales growth for the region.
“While development may have plateaued, the second half of 2015 saw a 27% increase in the combined floor area of consented new commercial buildings, which brought the annual total to 527,217sqm. That rise indicates that development is still strong for the region, with fewer consents but greater project values.”
“As well as a pipeline of higher value new development, transactions for the year totalled $245 million reflecting an unprecedented number of sales above $5 million, so the Canterbury market is in good shape heading into 2016.”
The Christchurch MarketView report shows that:
Industrial shines in strong year
The level of consented floor area in new industrial buildings ramped up in the fourth quarter, reaching the highest annual level in the past five years. The average floor area of industrial buildings consented is up 71% y-o-y, implying some significant developments are on the horizon.
Buoyant industrial investment market
2015 saw the number of industrial transactions above $5 million double and the value of sales increase threefold. Whilst syndicators have been particularly active, private NZ-based investors remain a driving force in the market.
Strong retail sales growth
Canterbury retail sales totalled $11.4 billion in 2015, representing an increase of 6.5% over 2014. Retailers in Christchurch also stand to benefit from increasing visitor arrivals which were up 7% in the 12 months to December 2015.
International retailers set to make presence in the central city
Recent announcements from major retailers coming in the central city include Topshop’s new 1,200sqm store in The Crossing and Australian cosmetics store Mecca Maxima into the ANZ Centre. In addition, Zara and H&M are also reportedly looking to enter the Chirstchurch
retail market.
Demand for retail shifts towards CBD
In terms of recent trends in retail rents, there has been some firming in the rates for hospitality premises, although the benchmarks at the upper end remain unchanged. There has also been signs of some softening around the periphery of the city centre as demand shifts towards the CBD.
Central city and suburban office markets adjust to meet new supply
Office vacancy in the central city has declined over the last 12 months although in light of looming supply, landlords became more willing to offer incentives (primarily to large corporate occupiers), seeing net effective rents remain under pressure.
Growth opportunities support healthy office yields
Prime office yields across the market were stable throughout the year, although these remain healthy where there is a perceived opportunity for growth.
Tim Rookes, Managing Director CBRE New ZealandChristchurch, says that Canterbury is a very active market, trying to strike a new balance.
“The low cost of funds is pushing investors to chase returns, so the challenge for owners and occupiers is to bring about a meeting of minds in terms of yield. Strong development means Christchurch’s CBD is becoming tangible now and landlords are becoming more accommodating with deal structures which is positive for the opportune occupier.”
Rookes says that the overall question facing the Canterbury commercial property sector is; where and what is market rent as investors and landlords look for future growth opportunities as the market finds its new equilibrium.
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