Foreign buyers push sales to record level

Auckland commercial properties are in hot demand.

The volume of commercial property sales has reached its highest level on record for this time of year driven by greater levels of foreign investment according to commercial real estate agency JLL.

"In the year to date, investors have acquired more than $2.8 billion worth of New Zealand's industrial, retail, and office properties compared with $2.1 billion in the previous year," says managing director Nick Hargreaves.

JLL tracks every commercial transaction in New Zealand above $5 million and is forecasting the total figure to reach well over $3 billion by December 31 with a number of large commercial properties still under contract. The agency says total sales volumes are up 25 per cent over the 2013 full year volumes and Auckland and Wellington have hit record levels of sales.

"We are only in October and sales volumes are already at their highest level with well over another $500 million expected to be transacted by the end of the year," Hargreaves says.

"We are likely to reach well over $3 billion by the end of the year which will make this year the largest volume of transactions in any given year by a clear margin," Hargreaves says.

"These record figures prove to investors there is a significant amount of liquidity in New Zealand. Local investors and those in Australia, Europe and Asia see New Zealand as a leading destination for capital and a key location in the Asia Pacific region. The yield spread available on prime assets in New Zealand is relative to regional peers and the growth outlook means we are seeing a number of global institutional investors looking to include New Zealand as part of their wider global allocation."

JLL Research says Auckland's total sales are sitting at $1.89 billion year to date with sales volumes up 8 per cent from 2013.

"The real winner is Wellington which has increased at a faster rate than Auckland," says Justin Kean, national director of research and consulting for JLL. "Wellington had a 46 per cent increase in the total number of sales and highest recorded level of $488 million worth of transactions."

Kean says institutional commercial property stock in Auckland is being actively pursued by investors who are stepping outside their traditional focus and moving away from premium A-grade assets down into the lower A-grade properties and into B-grade buildings.

"Also, investors are also looking past Auckland for stock which is largely the reason we see Wellington benefiting."

Kean says international investors have had access to increasing levels of cash this year, but the issue of "scarcity of quality stock" remains.