Cashed-up kiwifruit growers trading in orchards for commercial real estate in Tauranga will help to create "more jobs and more business" in the city, business leaders say.
Two of Bayleys Tauranga's biggest commercial property sales in 2018 were to gold kiwifruit orchardists, who each sold then bought commercial property in the city.
A long-time Whakatāne kiwifruit grower sold his orchard for more than $12 million and splashed out $6.2m on a car yard site in Cameron Rd.
The site was earmarked for development into either a multi-storey retail and commercial building, or mixed-use retail and residential apartment complex.
A Te Puna kiwifruit orchardist leveraged the equity in his orchard to buy an industrial complex in Maleme St, Greerton, for $7.7m.
Bayleys Tauranga commercial manager Mark Walton said the agency was working with two other kiwifruit growers, two avocado orchardists and a dairy farmer all looking to buy commercial property assets in the city.
Walton said their unconditional buying budgets specifically for acquiring commercial property assets ranged from $1.5m to $6m.
"The Bay's horticultural sector – particularly kiwifruit and avocado production – is currently delivering record crop value yields, and subsequently land values are at peak," he said.
"A number of orchardists - particularly those who have owned their properties for more than 10 years and successfully worked through the PSA crisis - are now taking advantage of those record, high-productive land prices, and are selling up or leveraging to release considerable amounts of equity."
Walton said sellers were allocating $1.5m to $1.9m to buy homes on lifestyle blocks on the city fringe, depositing similar amounts in interest-bearing term accounts and spending the rest acquiring investment properties or development sites.
Tauranga's underlying economy was strong and showed no signs of easing, Walton said.
"So not only are we seeing investment capital coming into the region, but we are also tracking investment capital moving from one property sector to another within the region."
In November, Bayleys Tauranga rural specialist Snow Williams sold a $6.135m six-hectare G3 kiwifruit orchard in Te Puke – equating to $1.18m per canopy hectare of crop.
Sales data from Bayleys Tauranga showed at least five other big kiwifruit orchard sales in Pongakawa, Te Puke and Paengaroa recorded values ranging from $7.2m to $12.05m in the past 18 months.
G3-planted orchards were now achieving average sales values of $1m a canopy hectare, while avocado orchards were selling for about $300,000 per canopy hectare, Williams said.
"Much is made of Aucklanders selling up their multimillion-dollar homes in the rat-race, paying off the mortgage, and coming down to Tauranga to buy a new lifestyle debt-free," he said.
Priority One business partnership manager Mark Irving said the fact that cashed-up kiwifruit growers were seeing buying commercial property in Tauranga as a good investment gave a vote of confidence in the economy.
Irving said developers of city projects such as the Farmers redevelopment, University of Waikato's new CBD campus, the $50m skyscraper at 2 Devonport Rd and the Tauranga City Council's Heart of the City projects were speculating on the expected impacts of the university campus.
"Those four projects are a big magnet for people. They see an investment opportunity," he said. "These types of developments will create employment. It is encouraging."
Tauranga Chamber of Commerce chief executive Stan Gregec said any new investment in the CBD meant the potential for "more jobs and more business".
"It's great to see local money being invested locally," he said. "It shows confidence in Tauranga's economy."
Meanwhile, PGG Wrightson rural and lifestyle sales consultant Stan Robb said the majority of existing or previous buyers were selling to upgrade into bigger orchards.
One man sold two of his orchards to buy "one big one", Robb said.
Two orchards had recently sold for nearly $10m and another for $8m, which he said worked out to be close to $1.2m per canopy hectare.
However, Robb said it was the top properties that were making the big bucks.
"It's got to be a top property with good structures and good orchard gate return per hectare," he said.
- Whakatāne kiwifruit grower sells orchard for $12 million, buys Tauranga car yard site for $6.2m
- Te Puna kiwifruit orchardist leverages equity in his orchard, buys industrial complex in Greerton for $7.7m.