Sustained local activity and offshore interest sees nearly $3 billion of property deals
The New Zealand market is continuing to boom, experiencing sustained growth in transaction volumes with much of that coming in the office sector according to a new report by CBRE New Zealand. Other trends include the rise of alternative investment mandates in areas like student accommodation and hotels, according to Brent McGregor, Executive Chairman of CBRE.
The half yearly MarketView report by the international real estate services agency details transaction volumes totalling in $2.9 billion due to 97 properties in the $5 million+ range changing hands across the country for the first half of this year.
Office sector accounts for over half of the transaction volume and deals at the upper end of the price spectrum featuring with six transactions over $100 million (five in the office sector and one in retail).
Institutions are the most prominent purchaser group at 55% of transaction volume or $236 million, which is well above the ten-year average of 30%. Institutions also dominate on the vendor side with 57% of the market, followed by private investors at 43%.
Head of Research at CBRE New Zealand Zoltan Moricz says the half yearly transaction monitor report is a clear illustration of a highly liquid property market: “Clearly, there are parties who believe that the time is right to realise value gains from investments made a number of years ago. Equally, others see the market as continuing to provide strong potential and a good place to invest their capital”.
Offshore investors continue to be attracted to New Zealand properties with international investment being net positive and rising with particular interest coming from investors in North America and Australia according to the report.
Auckland, as the largest market, accounted for 73 of sales totalling $2.3 billion or 78% of total sales volume nationally with eight transactions recorded above $50 million.
In Wellington, 13 properties in the $5 million+ range totalling in $426 million changed hands and with $146 million or 34% of sales volume, office was the largest transactional sector.
In Christchurch, transaction volumes totalled $204 million with 11 properties in the $5 million+ range sold in the first half of this year. $104 million or 51% of that sales volume was a result of retail properties changing hands.
With $1,681 million or 58% of total sales volume the office sector was the largest transactional sector in the first half of 2018.
The largest individual transaction was the purchase of seven buildings in Auckland’s Viaduct Quarter as part of the VXV portfolio (total NLA 80,000sqm), by Blackstone Group from Goodman/GIC Partnership for $635 million.
The next highest were both purchases in the office sector again, 125 Queen St for over $200 million and a 50% share in ANZ Centre in Albert St for over $180 million, both to Invesco Asset Management.
With 40 sales, the industrial sector accounted for 15% of the total sales volume nationally with the largest being the $25 million purchase of the Americold Cool Store in Auckland by Augusta Industrial. The next largest industrial deal was the Steel and Taube in Blenheim Rd Christchurch to $21 million to a private investor.
There were 16 sales totalling $349 million in the retail sector, 12% of sales volume nationally, with the largest being North City Shopping Centre in Wellington which sold for $100 million.
Development sites accounted for 9% of sales volume nationally, with the largest being the Government’s $134 million purchase of a Unitec site in Auckland for residential use. Another notable sale was of a 10-hectare industrial zoned parcel in Wiri, sold by Fletcher. The site’s purchase marks the local market entry of international industrial property investor developer Logos.
Other sector transactions of note include a hotel in the Auckland market which changed hands for $16 million and a carpark for $40 million.
Overseas investors purchased $1,572 million of New Zealand commercial property market in the first half of 2018 and sold $295 million with the most active investor coming from USA, Australia, Singapore Switzerland and Hong Kong.
Overall net overseas acquisitions of $1,321 million which is the second highest in last five years, surpassed only in the second half of 2014 at $1,600 million.
Most of the purchases were by offshore institutions which accounted for $1,266 million and offshore private investors purchasing $343 million of commercial property.
The largest property development site bought by an offshore investor was a site in Roscommon Road in Wiri, South Auckland which was purchased by Logos in order to develop a complex of industrial facilities.
McGregor says the volume and size of transactions in the first half of 2018 points to continuing buoyant market conditions throughout the New Zealand market with an interesting trend towards alternative investments.
“The core sectors of office, retail and industrial continue to prove strong investment opportunities for offshore investors but we are also seeing an alternative investment mandate for Student Accommodation, Multifamily residential assets and hotels. This trend highlights a broader drive globally by institutional investors to broaden their exposure beyond the traditional core sectors.”
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..
