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Investor confidence in Tauranga's commercial property market is outpacing all other regions of the North Island, a new survey has revealed.
Confidence in Tauranga and Mount Maunganui's commercial sector tied with Queenstown at the top of Colliers International's latest survey.
The company's Commercial Property Investor Confidence Survey for the last quarter of 2019 showed 57 per cent of respondents were optimistic in the city's commercial property market - the same as Queenstown.
A total 37 per cent were neutral and only 7 per cent were pessimistic.
Rachel Emerson of Colliers International Tauranga said Tauranga's property market was in excellent shape, with yields continuing to sharpen and investor confidence outpacing all other regions of the North Island.
Bayleys Tauranga commercial manager Mark Walton said the value of commercial properties sold by the company was up 40 per cent in the past three years.
"All key indicators have increased significantly over the last three years including improving yields, rental rates and the price for commercial/industrial land for development sites has increased significantly."
Walton said general rental yields for commercial property in Tauranga were in the 4 to 6 per cent range depending on location, the strength of the lease and quality of the building.
Three years ago, the range was between 5 and -7 per cent, he said.
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Walton said lowest interest rates in decades had contributed to investor confidence in the city's commercial property market.
"This is encouraging those with term deposits to look for a higher return through commercial property, which over the last decade has generated strong returns of around 10 per cent per annum through a combination of cash flow and capital gains," he said.
Walton said Tauranga's strong population and economic growth made the city's commercial property sector a very desirable market to invest in.
"We are continuing to see investors from all over the country wanting to get exposure to the Tauranga market," he said.
Ray White Commercial Tauranga director Philip Hunt said everyone wants to live in Tauranga and interest and demand for commercial property was "exceptional".
"I have never seen it better in the last couple of years. Our office had its biggest month ever in January/December ... it is exciting times still."
Hunt said it was also exciting to see a varied number of smaller businesses being able to upgrade either from home and into their own building or into bigger premises.
"I do find it very rewarding seeing these people grow in their business."
Priority One chief executive Nigel Tutt said he was not surprised at the level of confidence shown by investors.
"Tauranga is a very popular place with a strong business sector," he said.
"Opportunities for commercial property investment have only grown over the past year and we expect that to continue."
Tauranga Chamber of Commerce chief executive Matt Cowley said cheap lending rates, steady population growth and the region's exporting success had made Tauranga an attractive place for business investment.
"After the recent rule changes to residential property investments, more investors would be looking into commercial property. So there [are] good supply and demand conditions at present," Cowley said.
"While GDP may fluctuate over time, commercial property overall usually remains constant in a growing city like Tauranga."
Emerson said a hospitality investment in Tauranga's city centre and a redevelopment opportunity on the CBD's fringe were up for grabs, giving investors and developers a chance to get a head start in 2020.
Unit 3 of 59 The Strand occupied by a boutique gin and cocktail bar Miss Gee's and a property zoned for intensive redevelopment at 37 Monmouth St will go under the hammer on February 20.
The tenant is on a new three-year lease returning $63,685 in net annual rental income, with two rights of renewal of five years each.
Meanwhile the redevelopment property at 37 Monmouth St comprises a 209sq m building on a 581sq m landholding.
Grant White of Colliers said Tauranga's growth ensured the Monmouth St property was an ideal location for residential development.
"City Living Mixed Use zoning allows for intensive residential redevelopment of up to 13m in height, " he said.
"Alternatively, a new owner could apply for consent for a mixed-use or commercial development on the site."
***There were 1372 responses utilised to construct the survey results***
Commercial property investor confidence survey results
Note: Figures are rounded
Net per cent: 50%
Net per cent: 50%
Net per cent: 44%
Net per cent: 42%
Net per cent: 39%
Net per cent: 27%
Net per cent: 22%
Net per cent: 22%
Net per cent: 23%
Net per cent: 13%
Net per cent: 9%
Net per cent: 3%
Net per cent: -3%
New Zealand overall
Net per cent: 27%
Source: Colliers International Research