Investors' order of the day: small but in good locations

The recent dramatic fall in interest rates has resulted in increased demand for well-located, quality commercial and industrial property, particularly at the lower-value end of the market.

A block of shops at 251-255 Dominion Rd, Mt Eden, marketed by Mike Grainger and Dave Bernard of Bayleys Auckland, attracted over 100 inquiries and 14 tenders.

The 407sq m stand-alone character building on a 568sq m site near the city end of Dominion Rd sold for $1,353,500 at a 6.4 per cent yield on its net rental income of $87,810 to a local investor.

The property is fully leased to three retail tenants on separate agreements, including the retail area, accommodation above and rear parking spaces. The tenants are Mt Eden Fisheries, Top Grade Tofu and Eden Kebabs.

Grainger, Bayleys Auckland's retail sales and leasing manager, says the low yield reflects the location's "scarcity factor", as well as the fact that it is in an affordable price bracket for small- to medium-sized investors.

He says a recent valuation showed there was also potential rental upside in the property, although most tenderers had discounted this given the current state of the market.

The shops were previously owned by several generations of the same family and this was the first time they had been sold in just over 80 years.

"A lot of investor attention is focused on location at the moment and the probability of finding another tenant if one of the occupants vacates or can't pay their rent," Grainger says.

"The family has indicated to us that these shops have only been vacant on the odd occasion in the whole time they have owned them, and then only for a short time.

"Retail space in Dominion Rd is very sought after, particularly near the city end, with further market impetus coming from the upgrade of Eden Park for the Rugby World Cup."

Also selling on Dominion Rd, through Mark Pittaway and Tony Chadhaury of Bayleys Manukau, was a multi-tenanted building anchored by ASB Bank and Valentines Restaurant.

The 1056sq m unit title complex in the Eden Quarter retail precinct at 292 -310 Dominion Rd sold for $4 million at an 8 per cent yield on its net rental income of $322,505. ASB Bank contributes $140,000 of that income and Valentines $147,000, with the balance provided by two smaller tenancies to Oasis Therapy and Kip McGrath.

The tenants have either exercised the first of a number of rights of renewal or are nearing the end of their initial lease term.

The property is in two titles and includes over 50 basement carparks. Pittaway has sold the property a number of times and says its attraction lies in its strong tenant profile and its high-profile street-front location right on busy Dominion Rd.