Commercial property action reflects 'surging' Bay economy

Turley & Co director Pat Turley says The Exchange business precinct in Havelock north is a recent development indicative of a very strong commercial property market.

A "surging" Hawke's Bay's economy is reflected by widespread commercial-industrial development activity, says Turley & Co's latest biannual Property Market Report for Hawke's Bay.

The report, to the end of June, lists dozens of multimillion-dollar developments and sales, comparing yields nationally with Hawke's Bay's "buoyant" market across all sectors.

The largest development is a planned $100 million new berthing facility at Napier Port "in response to record-setting export volumes led by high growth in local viticulture, horticulture and forestry".

"There is a bow wave of optimism off the back of booming primary and export industries and tourism. Napier Port cargo was expected to increase 49 per cent by 2026 and is reportedly tracking six years ahead of projections," the report says.

"Rapid expansion of pipfruit and viticulture insulated the province from nationally poor dairy performances (now rebounding)."

As a result property values were increasing across all sectors.

Prime industrial properties were keenly contested as exemplified by last year's BOC Gas Napier sale at 6 per cent and PBT Transport sale at 6.25 per cent yields.

Occupancy rates for better properties were up and widespread developments "a tell-tale sign of an expanding local economy".

In the office sector the main activity over the six months was a tenant reshuffle due to seismic concerns. The growth of office accommodation in Ahuriri continued, the latest example being the Tech Collective anchored by local telecommunications company NOW and NZX-listed Xero in a former wool store.

Havelock North continued to offer an offices alternative to Hastings, as evidenced by The Exchange and a planned Tech Collective.

CBD retail vacancy is improved in Napier and Hastings but the fringes were "anaemic" attributed partly to the popularity of big-box retail. According to Paymark figures Hawke's Bay led the country for increased retail spending in the first quarter of 2017.

Provided there were no major external shocks the report said the stars continued to be aligned for the Hawke's Bay's economy "that will likely continue to ramp up for the foreseeable future".

"Trends for Hawke's Bay commercial-industrial property are similar to residential property - experiencing solid demand, including from out-of-town investors as purchasers are squeezed out of other markets (Auckland, Tauranga, etc), albeit tightening credit conditions. Most evidence and key indicators remain positive for Hawke's Bay commercial-industrial property."

The report said there was headroom for growth but it was possible the Hawke's Bay commercial properties were at a valuation peak, or approaching it.

"It seems likely that 2017 could be overall another ripper for New Zealand and Hawke's Bay commercial-industrial property, however, with heightened risks that could conspire to spoil the party and maybe at short notice."

Associate director Kurt Richards said: "This is possibly typical of a market, at or nearing its peak."