City fringe sales on firm ground

This 1.06ha industrial site in McDonald St, Kingsland, sold for $9.95 million. Photo / Supplied

Entrepreneurial investors are on the lookout for properties that are close to the CBD with long-term potential.

A resurgence of interest in the Auckland central city fringe is being driven by investors looking for strategically positioned properties with good cashflow and added value potential in the longer term, says Alan Haydock, senior commercial broker with Bayleys Real Estate.

Haydock is a specialist in the Auckland central and city fringe commercial sales markets and he has recently been involved in the sale of more than $20 million of property in Kingsland, Grafton, Newmarket and Eden Terrace.

"Now that there is clear evidence that property values are on the rise again we are seeing a broader range of buyers in the market and, in particular, the re-emergence of more entrepreneurial investors looking for properties with upside potential."

The largest of his sales was a 1.06ha industrial site in McDonald St, Kingsland, with frontage on Altham Ave and Collins St, which sold by tender for $9.95 million at an 8.95 per cent yield. The property, six buildings totalling 8797sq m, is predominantly medium-stud warehousing, assoc-iated offices and amenities plus a gymnasium and a commercial studio.

The private investor who bought it saw it as a genuine "hold now and develop later opportunity", Haydock says. "In the meantime the property is providing an income yield of close to 9 per cent, which is a pretty attractive return in the current low interest rate environment."

Haydock says much of the older industrial stock will continue to disappear in the transformation of popular city fringe suburbs - such as Kingsland - into more upmarket commercial, retail and residential precincts.

"We would expect a site like this, with its business 4 zoning, near New North Rd and the Kingsland retail strip, to eventually be redeveloped into a higher value use. However, there are also few genuine warehouse locations that are as convenient to the Auckland CBD as this one, which is likely to underpin its attractiveness to industrial tenants in the shorter term."

Haydock also sold 1518sq m of land at nearby 25-29 Altham Ave, bought as a land-banking hold for $1,050,000 or $692 a square metre. "Now that the correction in land values has run its course we are starting to see the return of land bankers looking for strategically positioned holdings. This site was made more appealing by the fact that it also has a cashflow, with two leases to businesses using the land for vehicle storage producing annual net income of $56,000."

The relatively flat site encompasses three 506sq m titles and has a wide frontage to Altham Ave.

Haydock says its zoning allows for a variety of uses and development opportunities which could include industrial, retail, office or other commercial uses or a combination of these.

Closer to the CDB, Haydock has also sold a 1271sq m office building on a 1754sq m site at 5 Carlton Gore Rd for $3.9 million, representing a 9.3 per cent yield.

Haydock says the property is well positioned on a corner site, close to the CBD and motorway, with a mixed use zoning.

Haydock has also been involved in the sale of two investment properties in other areas he says will see more intensive mixed-use development in future which is likely to push land values up.

A refurbished three-storey office building on a 1104sq m site at 22 Dundonald St, Eden Terrace, marketed with Cameron Melhuish, was sold for $3.1 million and an 829sq m office and retail building at 2 Roxburgh St, Newmarket, sold for $2,830,000.

What's at stake

Properties: Auckland city fringe commercial
Trend: Renewed investor interest
Buyers: Entrepreneurs and land bankers
Why: Location, cashflow and added value potential.