Christchurch buyers seek small, local properties

4:35 PM Saturday May 5, 2018 True Commercial

This multi-tenanted commercial property at 236 Centaurus Rd, St Martins, generated 36 inquiries. Photo / Supplied

The market for small commercial investment properties in suburban Christchurch is booming with buyers search for higher-returning investments amid ongoing low interest rates, says Ben Cameron, sales executive with Savills Real Estate in Christchurch.

Cameron says there has been very high demand for commercial investment properties under the $2 million mark over the past year, especially retail properties in strong-performing locations.

“The buyer market in Christchurch is very strong for smaller retail investment properties in popular and fast-growing suburbs. People are lining up for this type of stock and demand far exceeds the availability of properties for sale.”

In many cases, properties are being sold to investors who live locally, Cameron says.

“Buyers often favour local investment properties, where they understand the dynamics of the tenants’ businesses. They’ve spent time at the properties, often as regular customers themselves, observing how well the tenants seem to be trading. This gives them increased confidence to invest.

“Everyone loves the convenience and familiarity of good local cafes and shops, and owning a commercial property close to where they live is evidently very attractive to a lot of people.”

Another buyer trend is residential investors diversifying into small commercial holdings, with commercial property perceived as being relatively hassle-free and easier to manage, Cameron says.

“We’re coming across a lot of buyers who have had some residential investments and are now looking to the commercial market as an alternative.”

Commercial property offers many attractive fundamentals when compared with residential property investments, says Cameron.

These benefits include generally longer lease terms, which span a period of years rather than six months to one year; providing better security of tenure.

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Local interest was strong for this small retail unit at 65 Carlton Mill Rd, Merivale, leased to a florist. Photo / Supplied

Commercial property leases are also usually on a net basis, (rather than gross as in the residential investment market), meaning certain outgoings such insurance and rates are paid by the tenant.

High demand from businesses for small, affordable retail units in good suburban locations also means vacancy rates are low, giving buyers confidence that their properties are likely to be easily re-leased if necessary, says Cameron.

A current sales campaign for a multi-tenanted commercial property at 236 Centaurus Rd, St Martins, has generated 36 inquiries, says Cameron.

The property is leased to popular local cafe Fava, a hair salon, fish & chip shop and encompasses a three-bedroom flat

“The property has been held by its family owners since the 1980s and placing it on the market generated a huge volume of inquiries,” Cameron says. “Most of the interest came from locals who were already familiar with the property and its occupiers.”

The property’s split-risk income stream, favourable local commercial zoning and the potential to redevelop the residential flat into another commercial unit were further drawcards, says Cameron.

Local interest was also strong for a small retail unit at 65 Carlton Mill Rd, Merivale, leased to a florist for a new six-year term. The unit was sold to a local investor for $683,000 in December 2017, representing a 6 per cent yield.  

Similarly, a unit in a new convenience retail development being constructed at 29 Ensign St, Halswell, leased to a pharmacy, sold to a local investor for $740,000 in April 2018, representing a yield of 5.87 per cent.

The development, called Oaks Village, is designed to help cater for the significant growth in housing developments in the southwest of Christchurch. It is expected to open later this year.

A small number of investment units in Oaks Village are still for sale, including one leased to a gym operator for a six-year term, while others have sold to owner-occupiers, says Cameron.

Savills is also looking for tenants interested in leasing units in Oaks Village – including a hairdresser, café, bottle store and potentially a takeaway food outlet.

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Ben Cameron, Savills’ Christchurch