A commercial property frenzy has hit Tauranga as investor demand outstrips supply with some developments being sold a year out from titles being ready, experts say.

The news comes hard on the heels of data from Priority One that shows 234 building consents were issued valued at $66.3 million last month compared to $44.5m in July 2015.

Commercial building consents experienced a massive spike over the same timeframes - 30 consents were issued valued at $28.2m including $10m for industrial storage and an office at the Port of Tauranga compared to 20 consents valued at $5.8m in July last year.

Collier International Tauranga managing director Simon Clarke said he had "a lot of investors that we can't find good quality, income producing properties for at the moment".


There was also not enough sections with land titles and that was pushing up prices, he said.

"The limited supply has kicked in so quick that developers can't keep up with it. We are seeing high-profile sections selling at Tauriko for as high as $325sq m so it's driving prices up and while that is good for owners that purchased a few years ago it's not so good for the people that actually want to expand their business now."

So far it was a record 2016 for commercial sales for the company, he said.

"We sold 14 Marsh St at auction last week. It had a new six-year lease to Ricoh, an annual rental of $96,000 sold for a 5.1 per cent return at $1.88m - we had 50 plus inquiries, seven phone bidders and eight bidders in the auction room.

"When we get the right properties we can get up to 25 bidders all competing for the same property. It's a seller's market. Tauranga is still quite affordable and is seen as a place of growth and that is why they want to invest here."

Ray White Commercial Tauranga leasing and sales team leader Philip Hunt said it had a sub office at Tauriko Business Estate and there was "virtually no land available now for sale that has title".

"In fact we are now selling land that is being worked on and will not have title until July or later next year."

He had sold out 19 industrial units at Paerangi Place and said the substantial lift in the sector was driven by a huge boost in business confidence.

"I think the amount of people moving into our region is creating a level of sustainability, it's creating business and creating new consumers and without a doubt that filters through to business activity."

Low interest rates meant people could now afford to buy their own building, he said.

"You can see the logic why would you rent when the rental you are currently paying can pay off your mortgage...so it's like setting up your retirement fund."

Bayleys Tauranga commercial manager Dickie Burman said the commercial growth was a strong flow on from the other major cities in New Zealand including Auckland and Hamilton.

"Because we are part of the golden triangle we are seeing the benefits of all the growth in those regions as well."

Quality Tauranga commercial and industrial properties that were coming to the market ''are hotly contested and seeing yields sub 6 per cent especially in the $1m to $2m value range.''

Although this type of property ''is sought after it was being tightly held'', he said.

"Somebody that has a good commercial property with a good lease will hold on to their investment if there is no compelling reason to sell, so a lot of these properties are not coming to the market. It is seen as a better investment than the current bank terms or other forms of investment"

Priority One projects manager Annie Hill said the commercial consent numbers were particularly significant.

"It shows strong confidence in the business community, with companies expanding or moving their operations here from elsewhere. These also tend to mean larger developments of a significantly higher value than residential consents.

"In addition, strong growth in commercial building consents is a reflection of a more productive economy."

Port of Tauranga chief executive Mark Cairns said the $10m consent was for an enormous new shed on the container terminal called Shed 16 which was 22,000sq m and would have a small administration office attached.

"It was largely for cargo and we are relocating OJI Fibre Logistics into the building they currently have their linear board and paper products in Shed 12 which we will demolish
for future container space for the new vessels that are arriving in October. It's an ongoing expansion that will give us a more contemporary or modern layout for the terminal the cargo is right at the southern end of the boundary and opens up more space for containers to be closer to the wharf space.''

Tauriko Business Estate booms

Tauriko Business Estate commercial manager Rachel Emerson said Tauranga is on a roll and "I cannot see any grey clouds on the horizon".

The 19 commercial units valued at $2.4 million which were granted consent last month had all sold off the plans.

"They have proven to be a desirable option for smaller businesses and tradies wanting to get out of the spare bedroom or garage."

Often land was going before people had come back to her with their preferred options and she was fielding about two to three inquiries a day, she said.

"Relocation of smaller businesses out of Auckland is now tangible and this is driving maybe 20 per cent of the demand. Secondly as yields for investment product are so strong across Tauranga and the whole country together with the low interest environment this has provided developers with attractive conditions for creation of a healthy development margin."

Local businesses were also doing well, she said.

"This gives these owner occupiers the confidence to ditch their landlord or upgrade their premises. They too are identifying with the market conditions and recognise that the time is ripe as they can benefit from their own occupancy and make day one and on going equity gains."

Tauranga Chamber of Commerce chief executive Stan Gregec said business confidence in Tauranga was "still at peak levels, especially with anything related to the building industry".

"The level of consents shows that Tauranga is on track for significant growth and transformation in the next few years, if all of these translate into real buildings and plant." - Carmen Hall PHOTO/ANDREW WARNER