The Ridge Plaza retail complex at Bethlehem sold for $3.05m at a yield of 5.1 per cent. Photo / Supplied
The Ridge Plaza retail complex at Bethlehem sold for $3.05m at a yield of 5.1 per cent. Photo / Supplied
Soaring property values and "historically low" vacancies within the industrial property sector are pushing up rents, local experts say.
Bayleys research manager Ian Little said conditions were particularly tight within Tauranga's industrial sector.
"Vacancies have hit historically low levels, and upward pressure on rents is intensifying," Little said.
Bayleys RealEstate research showed the overall vacancy rate within the industrial property sector was a low 2.4 per cent - down from 4.4 per cent at the end of 2017.
Rental returns on prime industrial sites now ranged between 4.5 per cent and 5.54 per cent.
Little said prime industrial land in Mount Maunganui was now selling for up to $1100 per square metre.
Bayleys Research manager Ian Little. Photo / Supplied
However, commercial property experts said demand was outstripping supply as more people looked to invest in the sector, with returns on term deposits at just 2 or 3 per cent.
Strong investor demand for a limited number of retail properties had seen rental returns remain strong - the Ridge Plaza retail complex at Bethlehem, for example, selling for $3.05m at a rental return of 5.1 per cent.
Bayleys Tauranga commercial manager Mark Walton said the commercial sector seemed to be driving "exponentially low" interest rates.
Bayleys Tauranga commercial manager Mark Walton. Photo / File
Walton said more people were moving to town and buying up businesses, but there was a shortage in supply of commercial and industrial property, which was making it hard for tenants.
"There are more investors out there and people who have properties to sell. The challenge is they get 2 or 3 per cent in the bank on term deposit, so there are a lot of people fairly motivated to buy commercial property," he said.
"What we need is for the city to open up more industrial and commercial land which will give tenants and developers more opportunities. But before there is more land there needs to be more infrastructure."
Priority One projects manager Annie Hill. Photo / File
Priority One projects manager Annie Hill said Tauranga had been a popular place to establish a business in the last five years.
However, Hill said a previous flow of industrial land was now starting to decrease.
"There is still land available so we are not seeing any impact on our efforts to attract new businesses to the city," she said.
"However, if more land is not opened up for development in the next two years or so, we will start to see an effect on new business being able to establish here."
The Bayleys research also found Tauranga's office sector was undergoing a "renaissance".
Research manager Ian Little said more smaller businesses were venturing back into the CBD as new projects emerged.
"New office builds over the past few years have added to the overall stock of prime space in the city centre and have resulted in rents generally tracking sideways, while much of this space was absorbed," Little said.
He expected a similar pattern in the next 12 months.
Annie Hill said Tauranga's city centre was transforming with about $370 million in developments either recently completed, under way or planned in the next few years.
That included the new University of Waikato campus, Farmers building, the Harington St transport hub and the Our Place container village.
"We are seeing new businesses establish and those that previously relocated out of the city centre returning to benefit from these opportunities," she said.
Downtown Tauranga chairman Brian Berry. Photo / File
Downtown Tauranga chairman Brian Berry said new "A-grade" office buildings at the northern end of the CBD had attracted some substantial tenants back in the CBD.
Demand for smaller offices had also been steady, Berry said.
"Following a period where most leasings reflected relocations within Tauranga ... we are seeing national tenants and very credible start-up businesses looking to open offices in Tauranga," he said.
However, he expected demand and retail rentals to remain flat and challenging in the next 12 months while construction and streetscaping continued in the CBD.
