Bargain buys for first-time investors

The Church St property has a good balance of office and warehouse space. Photo / Supplied

Five affordable warehouse and office units in the heart of the Penrose offer first time commercial property investors the chance to enter the market for as little as $550,000.

The five unit property at 419 Church St comprises an area of 3144sq m, split over two floors with 1448sq m of office space and 1696.9sq m of warehouse area.

Owned by successful developer Southpark Corporation, it is being marketed for sale by deadline private treaty, with offers due to close on July 21 the property through Colliers International brokers Dwayne Warby, Andrew Hooper, and Hamish West.

Warby says that the offer will suit a wide range of buyers, providing the opportunity to purchase one or more of the five titles on offer or to pick up the whole property.

"Smaller investors could buy single or multiple unit titles, giving them a great opening into the commercial property market at an affordable price, in a highly sought-after area and with a strong spread of tenants. There are not many opportunities to get into commercial property for $550,000, so this is a compelling alternative to residential real estate or long-term bank deposits."

Equally, Warby says, the property, with a good balance of office and warehouse space, will appeal to passive investors, add-value buyers or even a single buyer, who could pick up the entire offering and work through each unit title to boost the values.

Warby says the majority of the property is office space "which provides future-proof flexibility in that it will be easier to find tenants and simpler from a management perspective".

Of interest to potential buyers is the fact that Southpark Corporation, whose office is in the building's Unit E, will remain as a tenant on a six-year lease for 409sq m on the first floor of the building.

Southpark's chief executive, Richard de Haast says the building is the firm's head office "and the Hugo Johnston precinct is where the majority of our tenants and remaining development land are located".

"We have successfully completed over 150 projects, mainly for internationally recognised companies, with over 50 projects alone in the Penrose-South Auckland area." De Haast says.

A privately owned New Zealand corporation founded by John Sax, Southpark Corporation has been a leader in the redevelopment of much of the former "smoke stack industries" within Auckland such as the former Affco Southdown Freezing Works, Hellaby Works, Shortland Works, Taniwha Works and Pikes Point.

One of the largest private industrial developers in the country, Southpark has just completed work on the second stage of development for Seamount, a 16,500sq m warehouse at Pikes Point, says de Haast.

"We are refining our direction as a company, concentrating on major investments and developments. As part of this process, we are reviewing our portfolio and letting go of some of our passive investments, such as this building," he says.

Hooper says that robotic vehicle automation specialists INRO occupies the most space within the complex. It has 1667sq m of ground floor area, comprising 463sq m office and 1204sq m warehouse, in Unit B on a lease that generates $178,000 per annum.

"A growing business that has Fonterra as a major shareholder, INRO uses robotics to automate existing forklifts, enabling the vehicle to drive by itself for the majority of tasks, yet still be operated manually for ad hoc work," Hooper explains.

Fortlock Security occupies 262sq m in the ground floor Unit A, on a lease that provides $52,539.96 per annum. The 18-year-old company is s a leading provider of custom risk management, security management and telecommunication systems which are designed to make New Zealand businesses and homes safe and secure.

Of the remaining space, the 492.9sq m Unit C, once occupied by local automotive specialist Diesel Autos, is now vacant and has already been sold.

The 314sq m Unit D is also vacant but rent for the space is guaranteed by Southpark.

"The speed of the sale of Unit C demonstrates the strength of demand for the overall property," says Hooper. "The current tenants are doing well and here for the long term."

West says 419 Church St East, is well located being only 300m from Great South Rd.

"Penrose is a well established industrial precinct that has become the best known and developed location for exporters and importers over the years. It continues to attract significant businesses and compete effectively with the newly established Highbrook industrial estate."

Describing it as "the centre of Auckland's industrial compass point", West says that the locality has multiple access points and numerous support businesses close by.

"Penrose is becoming increasingly central as the city expands and more intensive development happens along the Greenlane corridor. This building's location has great access to the city centre as well as the main motorways and rail services."

Alan McMahon, Colliers' research director, says that the latest statistics show that the industrial sector is coming into a growth phase.

"As confidence levels recover and promises to tip back into positive territory, it is industrial sentiment that leads the way. After residential, industrial tends to be the first property sector to recover after a downturn."

McMahon says that positive returns have been recorded this year in the Property Council of New Zealand/Investment Property Databank (PCNZ/ IPD) investment performance for industrial property. "Certainly, the BNZ Capital performance of manufacturing index released in mid-May showed expanding manufacturing output for April for the third month in a row."

McMahon says that although overall vacancy levels are slightly above their 10-year average, various economic and business surveys have shown improved confidence this year, which is reflected in the increasing number of leasing inquiries in recent months and warehouse rents in prime Penrose locations holding firm between $100 per square metre and $115 per square metre.

"Penrose is very robust helped by steady demand, industrial yields have remained largely stable over the last 12 months. Indeed prime yields have shown signs of tightening in the second quarter of this year."