Strong competition for a variety of commercial and industrial properties at Bayleys' first Total Property portfolio auction for the year resulted in a 90 per cent clearance rate with all but one of 11 offerings selling at or before the auction, many at very low yields.
Of the eight investment properties that sold, four sold at yields of under five per cent and two between five per cent and 5.5 per cent.
The lowest yielding property, a BNZ outlet in the Lincoln North Shopping Centre on the corner of Lincoln Rd and Universal Drive in Henderson, sold at a 4.37 per cent yield.
It also fetched the highest price at the auction of $3,020,000.
Marketed by Oscar Kuang and James Chan, of Bayleys International Division, the 341sq m unit generated very strong bidding from multiple parties with close to 60 bids being made. The property was declared on the market by auctioneer Richard Valintine at $2,450,000 and a long sequence of mostly $10,000 increases added a further $570,000 to the price before the hammer finally came down.
Kuang says investors were attracted by the unit's central location in the retail complex next door to a Kiwibank/NZ Post outlet and close to two other major banks and the strength of the tenant. The bank has been in occupation since Lincoln North was developed 10 years ago and it recently renewed its lease for three years, with one further three-year right of renewal.
The outlet store at 441 East Tamaki Rd.
Two properties sold at yields of 4.48 per cent. One was a 344sq m two-levelworkshop and office building on a 304sq m Mixed Use zoned site at 18 Newton Rd, Grey Lynn which was sold for $1,420,000 to an investor by Cameron Melhuish and Andrew Wallace. It is occupied by an automotive business on a lease until 2020, with no rights of renewal. The lease has annual three per cent rental increases.
A 58sq m unit centrally positioned in the 22-unit The Foundation retail convenience centre in Oteha Valley Rd, Albany was also sold at the same yield for $700,000 by Matt Lee of Bayleys International Division in conjunction with Terry Kim and Michael Block, Bayleys North Shore Commercial.
This unit is leased to Bruce Lee Sushi & Roll North Shore Limited for nine years from June 2014 with annual rental increases to Consumer Price Index plus one per cent and to market in mid 2019. The auction on this property was brought forward after the vendor received an offer they were prepared to accept. Bidding was opened at a declared reserve of $600,000 and a further 41 bids added an additional $100,000.
Also selling for under a five per cent capitalisation rate was a 551sq m warehouse and showroom building on a high-profile corner location close to the motorway interchange at 59 Carbine Rd, Mt Wellington, marketed by Tony Chadhary and Sunil Bhana, which was knocked down under the hammer for $1,505,000 at a 4.78 per cent yield. Kresta Blinds International, which has been in occupation for 18 years, has recently renewed its lease for six years.
Bayleys national director commercial John Church says while it was now not uncommon for one or two properties in a portfolio auction to sell at sub five per cent yields, it is very unusual to have 50 per cent of the investment offerings sell at this level.
"These were reasonably strong offerings in good locations with well-established tenants, while some also had guaranteed rental growth which investors like. The strong competition they generated is a reflection of the scarcity of good offerings in the market at present and investors are prepared to pay a premium to secure these.
"Yields are also continuing to follow interest rates down. Over the past year, the Reserve Bank has reduced the Official Cash Rate (OCR) from 3.5 per cent to 2.25 per cent and property yields have probably moved by more than one percentage point on average over this time as well.
"The OCR is now the lowest it's been since it was introduced way back in April 1999 and likewise property yields are the firmest they have been in many decades. Whether they will go any lower will be influenced by whether the Reserve Bank makes any further reductions in the OCR. However, they must be close to plateauing, particularly in Auckland, and most future capital appreciation will come from the rental growth that is resulting from the very low vacancy rates that are evident across many sectors of the market."
The complex at 1-3 West Coast Rd, Glen Eden.
Other properties which sold at the auction included:
• An 800sq m mixed-use complex on a high profile 1490sq m site with 21 car parks, on the corner of West Coast Road and Great North Road, was sold for $2,335,000 by Mustan Basgra, Bayleys Orewa. Located opposite the Kelston Shopping Centre and adjacent to Kelston Girls College, the property has four ground-level, road frontage units and one rear warehouse, fully leased to five tenants, producing net annual rental income of $118,000pa, while there is also 140sq m of vacant upper level office space.
• A 780sq m industrial building with multiple roller door access on a 1593sq m corner site at 47 Rennie Drive in the Airport Oaks industrial precinct, sold through Tony Chaudhary, Bayleys South Auckland for $1,442,500 at a 5.5 per cent yield. It is eased to Endraulic Ltd, which recently renewed for two years with one further two-year right of renewal. The current net annual rental of $80,000 will increase to $84,000 in 2017. The property was declared on ther market at $1,330,000 and attracted close to 60 bids.
• A corner 514sq m freehold site with $50,000 annual holding income at 22 Tennyson St, Takapuna. This was zoned for terraced housing and apartment under the Proposed Auckland Unitary Plan, selling for $1,590,000 at $3093 per sq m through Ashton Geissler and Simon Aldridge, Bayleys North Shore Commercial. It was the most heavily bid property at the auction drawing over 70 bids and was declared on the market at $1,330,000.
• A 718sq m warehouse and office building used by Pumpkin Patch as an outlet store on a 2,000 sq m site with 25 on-site car parks sold for $1,850,000 with vacant possession through Marty Roestenburg, Bayleys South Auckland
• A 540sq m industrial unit at 333 East Tamaki Rd, East Tamaki sold prior to auction for $1,000,000 at a 6.5 per cent yield through Katie Wu and John Bolton, Bayleys South Auckland. There is a five-year lease to Retailquip NZ from April 2016.
• Another unit in The Foundation, Oteha Valley Rd, Albany, a 356sq m office complex plus 10 car parks, leased to national quantity surveyor company Cuesko for six years to October 2020, was sold at its declared reserve price of $1.5 million, a 7.1 per cent yield, through Quinn Ngo and Matt Lee of Bayleys International.
