In a landmark transaction for the Auckland commercial property market, Viaduct Harbour Holdings Ltd has concluded the sale of an entire city block of nearly a hectare of land bounded by Beaumont St, Gaunt St, Daldy St and Pakenham St West in the rapidly developing Viaduct Quarter precinct.
The 9793sq m parcel was sold to Goodman Group for $40.1 million and has concept plans for the construction of four mixed-use buildings of more than 45,000sq m on the site.
The Viaduct Quarter comprises about 8ha of privately held land within the Wynyard precinct, which is being developed as an extension of the successful Viaduct precinct.
John Green, director of corporate and institutional sales for Colliers International, who marketed the property with colleagues Peter Herdson and Andrew Reed, says the deal followed a five-week marketing campaign that generated considerable interest from local and international developers and investors.
"The sale price represents $4095 per square metre with the top three offers all being within one million dollars of each other," Green says.
"This level of land value reflects the premium nature of the Viaduct and Wynyard Quarter, particularly with the quality of national and international tenants in the surrounding area and it demonstrates a strong desire for corporate tenants to be located in this area.
"The land value that has been achieved in this transaction demonstrates that this area is the premium location for development outside the CBD and is a true reflection of the demand that exists for land in the Viaduct and Wynyard precincts."
"In fact, this demand is only growing stronger. We received a subsequent inquiry at $4600 per sq m and, if we had another site to sell today, we believe we would get upwards of $5000 per sq m.
"This is consistent with the ongoing strong growth we are seeing in the market and in particular over the last year.
Paul Gunn, general manager property for Viaduct Harbour Holdings Limited, says Goodman's offer was not the highest received.
"We decided to transact with Goodman taking into account its track record of successful and high-quality developments," he says. "The price paid reflects the strength of demand for land in and around the Viaduct, with this site being located in one of the most popular development locations in Auckland."
Gunn describes the changes in the area since it was acquired from Ports of Auckland by Viaduct Harbour Holdings in 1996 as "exceptional".
"The design-led, master-planned approach that was embodied in Auckland Council's Plan Change 4 is now being realised through the unprecedented level of development being undertaken in the quarter. We haven't seen this scale of development since the Viaduct Precinct was being developed in the 2000s."
Herdson says the size of the site was a particular attraction because it presented the opportunity to undertake a master-planned, integrated development with combined common areas.
"This would have the benefit of leveraging value and amenity across multiple building sites," he says. "The overwhelming level of interest in the site demonstrates the appetite that exists in the market for larger development opportunities on and around our waterfront."
"While the property was subject to three leases, all of these were short-term or included demolition clauses to enable development to be commenced in the short term.
Viaduct Harbour Holdings had secured resource consent to demolish the buildings, so the property was sold very much ready for development. "Neither the purchasers nor the vendor placed any value on the improvements on the land," Herdson says.
In the Viaduct Quarter, Goodman and Fletcher Building already have construction well underway on a new headquarters building for Fonterra and a neighbouring six-level spec building, designated VXV Three, situated on an adjoining site.
Herdson says further significant developments are expected to be announced soon. The buildings going up join the existing headquarters for major corporates including Air NZ, Vodafone, KPMG, Microsoft and HP.
Reed says a recent Colliers survey showed that the supply of new prime office was at an all-time low.
"Considering the paucity of new options out there, combined with the shift in focus for major corporates to this area, momentum is building in a significant and sustained manner."
The balance of the Wynyard land to the north of Viaduct Quarter is owned by Waterfront Auckland with development due to start next year on several sites which are subject to exclusive development agreements with Willis Bond and Precinct.
Construction is also scheduled to start early next year on a 200-room hotel being developed by the China-based Fu Wah group on the old Team NZ site.
Auckland Council is undertaking substantial street and public space upgrades throughout the precinct, including the development of the central and linear parks connecting Victoria Park to the waterfront.