Hawke's Bay growth sees commercial property surge

Hawke's Bay growth sees commercial property surge

Retail vacancies in Napier and Hastings have fallen 20 per cent over two years despite increasing supply thanks to a surging regional economy, says Turley & Co's commercial property report to the end of January 2017.

The valuers and property strategists’ report lists extensive new and proposed Hawke's Bay developments and sales, comparing yields nationally with Hawke's Bay's "buoyant" market across all sectors.

"Well-tenanted retail investment properties rarely present in the market for long and these days often selling off-market," the report says.

"On the heels of seven to eight years of hard toil, the Hawke’s Bay economy is performing strongly. Booming fruit growing and viticulture insulated the province from nationally poor dairy performances (now rebounding)."

Consumer confidence is at "polar opposites" to recent years, citing Paymark’s December retail spending statistics for Hawke’s Bay showing it had the greatest national increase, up 11.1 per cent on December 2015.

Also in December last year The Edgewater Motel on Napier's Marine Parade sold at auction for $3.75million and a six per cent yield, attracting close to 50 bids.

While things were booming in Hawke’s Bay the only things "busted" were sales records, with the 6 per cent yield barrier broken from the sale of SBS Bank in Hastings last year with a 5.63 per cent yield.

Office and industrial sectors are tightening as the economy grows, with the second half of 2016 seeing the most buoyant sales conditions since before the 2008 Global Financial Crisis.

Hawke’s Bay industrial land values are rising but proposed new land supplies would likely moderate the trend and help contain rents, assisting Hawke's Bay's relative business competitiveness.

The office sector is seeing extensive development activity from four years ago, with seismic ratings a continuing value factor and catalyst for development.

Office investment sale transactions are infrequent and developments often held by the developer, the report says.

Rents for new premises have been high but some leases include undisclosed inducements.

The trend of Napier tenants migrating to Ahuriri continues, replicated to a lesser extent by Hastings tenants migrating to Havelock North.

The price gap is narrowing between very good and poor property in Hawke's Bay for factors such as: location, lease quality, versatility, age and seismic performance.

"This is a classical boom behaviours tendency" says Pat Turley.

The Hawke's Bay economy would continue to drive the commercial property market "into the foreseeable future provided there are no major external shocks".

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