Commercial sales in Tauranga have reached "unprecedented" levels with record returns attracting investors from across the country.
Some properties are not making it to auction and selling within weeks of being listed and demand is not expected to ease as the city becomes "land locked".
Bayleys Tauranga Commercial sales manager Mark Walton said the firm experienced a record quarter for the three months to June 30, selling more than $200 million worth of properties.
Sales included the Bethlehem Town Centre, which sold for $102.5m, and the large-format retail complex at the Tauranga Crossing which includes Gilmour's, Farmers and Bed Bath & Beyond that sold for $44m.
"We are experiencing strong activity across the market, with particularly strong demand in high-end commercial sales and with land sales, both residential development sites and industrial land," Walton said.
He said demand from large industrial tenants looking at expansion options was also growing and they were actively working with a large number of developers.
"It's important that industrial occupiers understand that with huge limitations on the availability of industrial land, design-build opportunities are quickly filling. With industrial property vacancy rates at record lows, coupled with a stronger than expected economic recovery, the appetite from developers and owner-occupiers to secure land for new premises will continue."
Leasing had also increased significantly right across the commercial sector.
Colliers International Tauranga director Simon Clark said he had been involved in the commercial market for 28 years and demand was "unprecedented".
"I have seen a lot of cycles and I have never seen the demand or record prices that are being paid at the moment."
He said 2020 was a record year for Colliers Tauranga and so far this year sales were up 100 per cent.
Clark had not crunched the final numbers but said it had sold almost every property it marketed.
A recent sale at 149 Totara St, Mount Maunganui received 130 inquiries and more than six offers and was sold before auction for $2.27m, with a 2.1 per cent return.
"I have never got that many inquiries on one single property and it was a record return. We are getting expressions of interest from around the country."
Return was a reflection of risk and growth as the price goes up the return lowers because it's the same rental at a higher price but investors continued to flock to Tauranga.
That interest was driven by the low vacancy rates and limited land supply.
"We're a very protected market and things grow when there are no alternatives to go to and Tauranga is landlocked."
Lease properties that weren't in the CBD were leasing within weeks and rents were rising.
Meanwhile, Colliers had sold several large sites at Tauriko Business Estate that went for $700 per sq m, up from $600 per sq m six months ago.
Ray White Commercial managing director Phil Hunt said this month would be its biggest month ever and he expected they would hit "not quite $50 million of sales".
His last three sales at Tauriko Business Estate would not be included in the July data but collectively sold for more than $20m.
He agreed land was scarce and there was a shortage of general stock across the board.
Hunt acknowledged the Port of Tauranga and said in his opinion a lot of sales were directly or indirectly related to the growth.
"Tauranga is an extremely strong region for mum and dad businesses. Other than kiwifruit, we don't have a lot of massive employers. I'm seeing now the direct benefits of Fletcher Winstone Wallboards and it feeds right through.
"A lot of businesses use the port and would not have the same access in other cities like Hamilton."
Tauranga Chamber of Commerce Matt Cowley said more businesses were operating in the city, which provided more career options and buying choices for locals.
"A strong local market sends a message to the Australasian development community that we're a great place to further invest in."
A member survey last year also found many members wanted to expand by employing more staff.
"But we need to have more housing options to attract a talented workforce to live here."