A five-level office and hospitality building on over 5000sqm of freehold land at 105 and 123 Victoria Street, Christchurch, has been sold by Countrywide Group to PMG Funds in a deal negotiated by CBRE New Zealand.
The property, which is leased to Nexia New Zealand, Alliance Group, NZ Merino, Pacific Radiology and hospitality operators, sold for $59.2m.
It is the first premium office building sale in the city for 2021 and follows a year of heightened activity in the Christchurch office market last year, with a number of $50m+ assets changing hands.
Tim Rookes, managing director of CBRE Christchurch, who brokered the Victoria Street deal with colleagues Cameron Darby and Bonnie Stone, says the transaction kicks off a year in which the Christchurch office property investment market is expected to gather further strength.
“2020 saw a surge in investor interest in commercial property in the city, particularly with large office buildings selling to New Zealand-based investors. In light of what 2020 threw at us it really was a remarkable year,” Rookes says.
“2021 is likely to bring continued growth in demand from both the national and offshore investment markets for the high quality, near-new assets which characterise the Christchurch CBD. This increasing weight of demand has already resulted in firming yields over the past year and this trend is also likely to continue. Investors are attracted to the strong potential for superior returns in commercial property than cash and equities, along with the tangible nature of the asset class.”
Some of the key transactions in 2020 included the sale of the Vodafone building at 213 Tuam Street for $59m and the Manawa building for $79m, both brokered by CBRE; as well as the $60m sale of the PWC Centre at 60 Cashel Street. These transactions were concluded at yields which set new benchmarks for large office assets in Christchurch.
One of the key benefits to investors of the Christchurch market is that it provides excellent value for investors, compared with returns available on key assets in markets such as Auckland, says Darby.
“The attractive yields on offer in Christchurch, together with the city’s modern building stock, have helped unleash an unprecedented wave of investment activity into Christchurch as buyers widen their search radius in pursuit of stronger returns aligned with quality assets.”
105 and 123 Victoria Street, which generates around $3.1m in net annual rental income, was designed by MAP Architecture and constructed in 2017 by Clearwater Construction.
The asset generated plenty of investor interest due to its high-quality construction, ‘urban chic’ character, strong line-up of tenants, prime location and the bonus of additional developable land, says Stone.
“This was undoubtedly one of the best office investment offerings seen on the open market in New Zealand in 2020. Investors are now faced with a scarcity of comparable assets in Auckland and Wellington, resulting in a significant level of pent-up demand into Christchurch and creating a new level of competition in the market.”
123 Victoria Street contains a total of 7,462sqm of net lettable area, with tenants enjoying the building’s contemporary, energy-efficient features, excellent natural light and spectacular views from the upper levels.
National property funds manager PMG Funds’ purchase of the property brings the company’s total acquisitions in Christchurch to around $150m over the past 18 months.
Daniel Lem, Head of Investment at PMG, says the purchase of 105 and 123 Victoria Street aligns with the company’s strategy to acquire quality, well located properties leased to strong tenants.
“As a long term investor we are always looking to acquire assets that will stand the test of time due to their location, build quality, lease profile and their ongoing attractiveness to quality tenants. 123 Victoria St satisfies all those criteria, as well as offering further value-add options around the use of the adjacent surplus land.”
ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
