Lower consent volumes and strength of retail see change in market
The market is moving into a new business as usual state in Christchurch as the region moves on from a solely rebuild focus, with more properties changing hands and CBD rents flattening off, according to latest research from CBRE.
The Marketview report for the first half of 2018 confirmed $204 million of commercial property sold in Christchurch over the first six months of this year, with 11 properties over $5 million changing ownership.
Compared to the same period last year, the report shows larger assets sold with five sales occurring in the $20-$50 million bracket. One of those being the South City Shopping centre which was the largest transaction for first half of 2018, selling for $46 million to private investors.
Retail as a sector represented the largest contribution to transactional activity in the city consisting 51% of sales volume. The activity being consistent with retail sales figures which had a strong performance in the June quarter with a 4.5% increase compared to June 2017 figures.
In the office market, prime yields in the CBD firmed 2 basis points over first half of 2018 while secondary CBD stock firmed 3 basis points. The suburban prime office market seeing the largest sharpening over 2018 firming 22 basis points as a result of strong lease covenants ensuring stock is less exposed to vacancy risk.
Managing Director for CBRE Christchurch, Tim Rookes says with consenting volumes continuing to decline, all signs are that the commercial rebuild market is winding down and moving to a new state of normal.
“The conclusion of the development pipeline should provide some stability to market rental levels in the next 12 months and allow organic growth and tenant attraction to drive CBD vacancies lower. Christchurch appears to have left the post-quake stasis and is now seeing more properties trade hands with transaction volumes currently more than double the pre-quake average.”
Rookes says the strong demand for quality retail is leading to a lot of occupier movement in the market which will settle in due course.
“While there are still elevated rates of retail vacancy in the CBD it is very competitive to secure premium locations. The abundance of competition is leading to elevated occupier churn as tenants seek to establish customer bases in an emerging market. This can be highlighted by the exciting new Kathmandu announcement with Carter group. The completion of the Hoyts centre will also provide a good boost to CBD attraction and will continue to entice other retailers to the area.”
In the industrial market, while prime yields have softened 12 basis points throughout 2018, secondary yields have remained stable, and assets are still sought after if they are well positioned with strong fundamentals, says Rookes.
“With five industrial sales, totalling over $60 million in transactions in the first half of 2018, there is still a weight of capital from both local and national investors”.
Looking ahead, the report notes a decline in regional consumer confidence in Christchurch compared to the first half of 2017 but an increase from the June to September quarter from 106.5 to 108.0, which are both still higher than the consumer national average of 103.5, and 98.2 in Auckland.
Senior Research analyst for CBRE, Richard Carr says the buoyant mood is being helped by a strong tourism outlook, a sense of vibrancy as commercial completions rise and a revitalised hospitality sector.
“We’re still seeing some strong growth in tourism annual visitor numbers in Christchurch which increased by 0.2% compared to September 2017 figures – contrasting the national 0.3% decline. On top of that, as the local populations renew their relationship with CBD, the hospitality sector is benefitting, and all complimented by a strengthening agricultural sector.”
“These factors, along with long WALT and new built assets with fixed rental increases are helping to drive strong investment interest from both foreign and domestic purchasers to opportunities in the Christchurch market.”
The market is moving into a new business as usual state in Christchurch as the region moves on from a solely rebuild focus, with more properties changing hands and CBD rents flattening off, according to latest research from CBRE.
The Marketview report for the first half of 2018 confirmed $204 million of commercial property sold in Christchurch over the first six months of this year, with 11 properties over $5 million changing ownership.
Compared to the same period last year, the report shows larger assets sold with five sales occurring in the $20-$50 million bracket. One of those being the South City Shopping centre which was the largest transaction for first half of 2018, selling for $46 million to private investors.
Retail as a sector represented the largest contribution to transactional activity in the city consisting 51% of sales volume. The activity being consistent with retail sales figures which had a strong performance in the June quarter with a 4.5% increase compared to June 2017 figures.
In the office market, prime yields in the CBD firmed 2 basis points over first half of 2018 while secondary CBD stock firmed 3 basis points. The suburban prime office market seeing the largest sharpening over 2018 firming 22 basis points as a result of strong lease covenants ensuring stock is less exposed to vacancy risk.
Managing Director for CBRE Christchurch, Tim Rookes says with consenting volumes continuing to decline, all signs are that the commercial rebuild market is winding down and moving to a new state of normal.
“The conclusion of the development pipeline should provide some stability to market rental levels in the next 12 months and allow organic growth and tenant attraction to drive CBD vacancies lower. Christchurch appears to have left the post-quake stasis and is now seeing more properties trade hands with transaction volumes currently more than double the pre-quake average.”
Rookes says the strong demand for quality retail is leading to a lot of occupier movement in the market which will settle in due course.
“While there are still elevated rates of retail vacancy in the CBD it is very competitive to secure premium locations. The abundance of competition is leading to elevated occupier churn as tenants seek to establish customer bases in an emerging market. This can be highlighted by the exciting new Kathmandu announcement with Carter group. The completion of the Hoyts centre will also provide a good boost to CBD attraction and will continue to entice other retailers to the area.”
In the industrial market, while prime yields have softened 12 basis points throughout 2018, secondary yields have remained stable, and assets are still sought after if they are well positioned with strong fundamentals, says Rookes.
“With five industrial sales, totalling over $60 million in transactions in the first half of 2018, there is still a weight of capital from both local and national investors”.
Looking ahead, the report notes a decline in regional consumer confidence in Christchurch compared to the first half of 2017 but an increase from the June to September quarter from 106.5 to 108.0, which are both still higher than the consumer national average of 103.5, and 98.2 in Auckland.
Senior Research analyst for CBRE, Richard Carr says the buoyant mood is being helped by a strong tourism outlook, a sense of vibrancy as commercial completions rise and a revitalised hospitality sector.
“We’re still seeing some strong growth in tourism annual visitor numbers in Christchurch which increased by 0.2% compared to September 2017 figures – contrasting the national 0.3% decline. On top of that, as the local populations renew their relationship with CBD, the hospitality sector is benefitting, and all complimented by a strengthening agricultural sector.”
“These factors, along with long WALT and new built assets with fixed rental increases are helping to drive strong investment interest from both foreign and domestic purchasers to opportunities in the Christchurch market.”
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ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 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.
ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 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.
