Record first half commercial sales

5:00 AM Wednesday September 28, 2016 Colin Taylor

Two buildings at 2/4 Graham St were bought by Augusta Capital for $204 million.

The first half of 2016 has set a new record for New Zealand commercial property sales totalling over $2.2 billion with building syndications being a noticeable trend, says a new research report.  

New Zealand Investment MarketView published by CBRE Research, shows that in the first half of this year transaction volumes totalled $2,208,000,000 surpassing the previous high of $1.68 billion in the first half of 2007.

The figures show a strong lift in the number of sales with 98 properties valued at over $5m value changing ownership compared to 76 in the first half-year of 2015, and 66 in 2014. This year’s first half total sales were only bettered by the 104 sales in 2007.

Zoltan Moricz, senior director of CBRE Research, says that the seasonal trend of sales volumes and values increasing in the second half of the year has been a distinct feature of the market over the last few years.

“The first-half numbers we are seeing this year are among the strongest we have ever seen. If the trend of stronger second-half-year periods is to continue, New Zealand could well see all-time record volumes and values of transactions this year.

“Investment activity highlights that, while retail and office are the most active sectors, development sites also feature strongly. In the current period, private investors have re-emerged as the most prominent purchasers, with 53 per cent of transaction volumes, followed by the listed property sector at 25 per cent..”

Moricz says another most noticeable trend has been the material rise in activity by syndicates which were strong net buyers in this half-year period – representing a general long term trend for this investor type.

“Syndicates sold $11 million of property and bought $378 million. There were seven properties bought by syndication, the largest including 2/4 Graham St where two recently completed buildings by Mansons TCLM which were bought by Augusta Capital for a total of $204 million. Another was the Cider Building bought by Oyster Property Group for $93 million.”

Andrew Stringer, CBRE’s national director of capital markets, says syndicates have historically focused on sub-$30m properties. “However, now we are seeing syndicators acquire very large assets of $80 million to $100 million with another in the pipeline of over $200 million. This shift towards the upper end of the pricing stratum in our view demonstrates a maturity in this investment avenue.”

True Commercial - 4 Williamson Ave%2c Ponsonby - Cider building exterior - artist%27s impression.jpg

The Cider Building was purchased by Oyster Property Group for $93 million.

Stringer says the market is well balanced at present.

“While there will always be a standout sector or location in any period, generally demand is consistent across all the main investable sectors, with broad participation from private investors, listed entities and syndicates.

“Although we have seen historically high levels of sales activity over the last four half-year periods now, investor confidence has a strong basis in the current economic fundamentals, population growth in our main centres and relatively low alternative returns. This gives a strong expectation of very strong second half of the year and beyond.”

The new report shows that regionally, the lift in sales has been led by Auckland, with 64 sales in the first half of 2016 totalling $1.4 billion, or 72 per cent of the total volume considered nationally.

There were seven transactions above $50m: The largest was Building A at 4 Graham St which was sold for $116m by Mansons TCLM to Augusta Capital Ltd; the Cider Building sale of $93m, Building B/C at 2 Graham St for $88m also to Augusta; the University of Auckland Tamaki Campus at 261 Morrin Rd for $81m; and a development site at 121 Beaumont St in Auckland’s Wynyard Quarter, which sold for $60m.

During the first half of this year, 12 development sites were sold for a total of $403m while 20 office buildings sold for a total of $473m and 18 industrial buildings sold for a total of $159m. Retail sales contributed $258m across 11 sales and two hotel sales totalled $12m.

There were 15 transactions over $5m in Wellington totalling $422m, while Christchurch had 11 sales totalling $115m. In Hamilton, the dominating transaction was a 50 per cent share of The Base retail centre, at Te Rapa, which sold for $192.5m to Kiwi Property by Tainui Group Holdings.

Overseas investors injected $340m into the New Zealand property market in the first half of 2016 but were net sellers overall, selling $600m worth of property including the single transaction of the Sydney-based SCA Property Group portfolio of $267.4m.

True Commercial - Zoltan Moricz%2c CBRE research analyst.jpg

Zoltan Moricz, CBRE Research.