Dip in sales but market still strong

An interior view of Spark Central at 40 Willis St, Wellington, which was sold by CBRE for $198m - the largest ever single transaction in the capital. Photo / Supplied

All regions in New Zealand experienced a dip in commercial property transactions during the second half of 2018, but market activity was still strong for the year, says CBRE's latest Marketview report.

Ninety commercial properties worth over $5 million were sold with a total value of $1.6 billion changing ownership in the second half of 2018.

Office was the largest transactional sector during the period with $606m or 38 per cent of total sales volume followed closely behind by industrial sales which contributed 33 per cent or $535m to the market total. In retail there were 12 sales in the over $5m bracket.

In Auckland, there were 69 sales in the second half of 2018 totalling $1.1b and accounting for 69 per cent of total volume.

The industrial market was very strong in the city, with 31 industrial buildings selling for a total of $439m while 14 office buildings were sold for a total of $303 million.

The report confirming four transactions above $50m over the period with the largest being the sale of Foodstuffs Distribution Centre in Mount Roskill to Goodman for $93m. Eight development sites sold for a total of $124m and the sales of retail properties in Auckland contributed $110m across nine transactions.

In Wellington seven transactions above $5m totalled $279m. Transactions for the period were dominated by one in particular – the sale of Spark Central at 40 Willis St by CBRE for $198m from a local private investor to a local syndicator. This sale also represented the largest ever single transaction in the capital. Other notable transactions included the sale of two hotels which sold for a total of $47m.

In Christchurch, a stronger second half of the year was underpinned by 14 sales totalling $241m predominantly in the office and industrial sectors. The largest of these was a $54m transaction of Castle Rock Business Park at Innovation Rd.

In terms of vendors, the report confirms that mainly private owners were selling during the second half of 2018, making up 64 per cent of transaction volume.

While 'privates' are also the main purchaser group, accounting for 43 perc cent of transactions nationally, their current market share of purchases is below their long-term average of 55 per cent. By contrast, institutions sold $259m and acquired $480m across the period which reverses the previous 10 years' norm of being a net seller for this investor group.

Foreign funds were also net buyers, accounting for $208m of purchases during the second half of 2018 while selling $173m worth of property. Overseas purchasers were dominated by Asia-Pacific investors mainly from Malaysia, Australia, Hong Kong and China.

Senior Research Analyst at CBRE New Zealand, Moshe Szweizer says looking back over the past decade saw a decline in the market share of lower end transactions in the second half of the year.

"In the last six months, lower end deals from $5m to $10m accounted for nearly half of all transactions; while upper end deals were around a quarter of total volume.

"However, this is not a dramatic shift in the market and can be balanced with the fact that total sales volume for the year was at $4.8b, a result only surpassed during 2014".

Brent McGregor, Executive Chairman at CBRE New Zealand, says the first quarter of 2019 has seen the 2018 momentum continue with a handful of large transactions mooted in late 2018 having been completed.

"We have also seen some new opportunities come to market, particularly in the office sector, and at this stage there appears to be as much demand as ever for good quality New Zealand assets," McGregor says.