Tauranga's commercial property boom is continuing this year on the back of an exceptional 2016, say property sources.

Last week's Colliers International auction saw properties at Tauranga, Mount Maunganui, Te Puke and Taupo, sold for a total of $10.9 million. Top priced was the Countdown Te Puke property, which changed hands for the first time since 1995 at $2.85 million.

In 2016, there were around 221 transactions worth $283 million, up 22 per cent from 158 transactions worth $232 million in 2014, according to Colliers International and CoreLogic data.

Colliers International Tauranga managing director Simon Clark said the latest auction result sent a clear signal that the market remained buoyant.

Advertisement

"Investors have been looking for guidance on the mood of the commercial property market, following a buoyant and active period of activity last year," he said.

"They wanted to know if the market had cooled. The good news from Friday's auction is that the market is as strong as last year - maybe even stronger - and 2017 is still rocking on. I haven't seen activity like that in the auction room, over a broad spectrum of properties, for quite a number of years. It's very positive for 2017."

Mr Clark said investor demand and inquiries had been as high this year as at the height of the market last year.

"Certainly the confidence is still there - and buyer demand is still there, too."

Simon Anderson, chief executive of Realty Services, which operates Bayleys and Eve's, said the company was seeing people chasing bids on commercial buildings.

"It's a very busy sector at the moment," he said. "It's just building on the positive vibe in the Bay of Plenty. It reflects the overall demand we're seeing from local buyers as well as people outside the region."

Simon Clark agreed that Tauranga continued to be attractive to out-of-town investors, with about half the bidders at its latest auction coming from outside.

"That's pretty unusual for Tauranga and shows their confidence in this region," he said. "We had three or four telephone bidders from out of town that really pushed the prices higher."

Advertisement

And he noted the bidders weren't affected by recent interest rate rises.

"There are still a lot of cash buyers from all over the country looking for better than bank returns. It's indicative that there's still a lot of money out there sitting on term deposit at poor returns."

Harcourts Tauranga co-managing director Nigel Martin said yields had come down slightly from the heights of last year, reflecting the higher prices owners were receiving for quality properties and tenancies.

However, the firm's latest sale of an industrial building in Newton Rd, Mount Maunganui saw five bidders, with the property selling at a yield of 5.4 per cent.

"If someone's going invest in the bank they're probably going to get 2.5 per cent, whereas investing in a commercial property they'll maybe get a 5.5 per cent return," said Mr Martin. "There's still strong demand, especially for quality commercial."

Mr Clark said commercial property offered a better yield than residential for property investors, who with the new bank lending restrictions were having to pay the same percentage deposits in both sectors.

"We are definitely seeing a move to commercial. But the price ranges of these recent sales were probably out of the reach of most residential investors."

Priority One projects and communications manager Annie Hill said the buoyant commercial demand reflected the competitive advantages of Tauranga.

"It's not just about businesses here growing themselves, but businesses moving here," she said.

"That's largely as a result of the issues being faced in the Auckland market. But it also reflects the strength of the Port of Tauranga and the lifestyle here, which make it easy to attract skilled and talented people. Tauranga is a popular place for people to base businesses."

[Factbox]

Recent commercial sales

-Countdown Te Puke, corner of Boucher Ave and Queen St: A 2061sq m site, plus 1311sq m on lease from the council. First time on the market since 1995. Sale price $2.85 million, yield 7.4 per cent.

-42 Hewletts Rd, Mount Maunganui: A 1644sq m industrial corner site. Sale price $2.56 million, yield 5.15 per cent.

-76 Koromiko St, Tauranga: Multi-tenanted 1747sq m industrial property. Sale price $2.16 million, yield 5.8 per cent.

-75 Aviation Ave, Mount Maunganui: A 2703sq m industrial property. Sale price $2.06 million, yield 5.3 per cent.

-20A and 20C Newton St, Mount Maunganui: Combined total of 664 sq m land with 545 sq m floor area. Sale price $981,000, yield 5.4 per cent.