Office sales lead the market followed closely by industrial
All regions experienced a dip in commercial property transactions during the second half of 2018, but market activity was still strong for the year, according to research by CBRE New Zealand.
CBRE New Zealand’s Investment Transaction Monitor report confirmed 90 commercial properties of over $5 million with a total value of $1.6 billion changed ownership in the second half of 2018.
Office was the largest transactional sector during the period with $606 million or 38% of total sales volume followed closely behind by industrial sales which contributed 33% or $535 million to the market total. In retail there were 12 sales in the $5 million + bracket.
In Auckland, there were 69 sales in second half of 2018 totalling $1.1 billion and accounting for 69% of total volume. The industrial market was very strong in the city, with 31 industrial buildings selling for a total of $439 million while 14 office buildings were sold for a total of $303 million.
The report confirming four transactions above $50 million over the period with the largest being the sale of Foodstuffs Distribution Centre in Mount Roskill to Goodman for $93 million. While eight development sites sold for a total of $124 million and the sales of retail properties in Auckland contributed $110 million across nine transactions.
In the capital seven transactions above $5 million totalling $279 million. Transactions for the period were dominated by one in particular – the sale of Spark Central at 40 Willis Street by CBRE for $198 million from a local private investor to a local syndicator. This sale also represented the largest ever single transaction in the capital. Other notable transactions included the sale of two hotels which sold for a total of $47 million.
In Christchurch, a stronger second half of the year was underpinned by 14 sales totalling $241 million predominantly in the office and industrial sectors. The largest of these was a $54 million transaction of Castle Rock Business Park at Innovation Road.
In terms of vendors, the report confirms that mainly private owners were selling during the second half of 2018, making up 64% of transaction volume. While Privates are also the main purchaser group, accounting for 43% of transactions nationally, their current market share of purchases is below their long-term average of 55%. By contrast, institutions sold $259 million and acquired $480 million across the period which reverses the previous ten years’ norm of being a net seller for this investor group.
Foreign funds were also net buyers, accounting for $208 million of purchases during the second half of 2018 while selling $173 million worth of property. Overseas purchasers were dominated by Asia-Pacific investors mainly from Malaysia, Australia, Hong Kong and China.
Senior Research Analyst at CBRE New Zealand, Moshe Szweizer says looking back over the past decade we saw a decline in the market share of lower end transactions in the second half of the year.
“In the last six months, lower end of deals ($5-$10 million) accounted for nearly half of all transactions while upper end of deals was around a quarter of total volume. However, this is not a dramatic shift in the market and can be balanced with the fact that total sales volume for the year was at $4.8 billion, a result only surpassed during 2014”.
Brent McGregor, Executive Chairman at CBRE New Zealand, says, “The first quarter of 2019 has seen the 2018 momentum continue with a handful of large transactions that were mooted in late 2018 being completed.
“We have also seen some new opportunities come to market, particularly in the office sector, and at this stage there appears to be as much demand as ever for good quality New Zealand assets.”
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 2018 revenue). The company has more than 90,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 480 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.
