L'Oreal hub a pretty package

The L'Oreal complex at 65 Hugo Johnson Drive comprises a 4349sq m warehouse and 1382sq m of offices. Photo / Supplied

The L'Oreal complex at 65 Hugo Johnson Drive comprises a 4349sq m warehouse and 1382sq m of offices. INTERNATIONAL cosmetics giant L'Oreal has decided to split the functions that have operated out of its big Penrose administration and distribution hub for the past 12 years, resulting in the 9080sq m site and building at 65 Hugo Johnson Drive being offered for sale or lease.

The property is being marketed by Andrew Hooper and Greg Goldfinch of Colliers International and features in Colliers' latest National Portfolio publication, with offers closing on April 8 unless sold or leased before.

"L'Oreal's core administrative team is heading for premises closer to Auckland's CBD," Hooper says. "Conversely, the company's warehousing and distribution operation is moving to a larger distribution location. This will happen in the middle of this year as the lease expires on July 23," says Hooper. "This creates an opportunity for a new owner to occupy the facility or enhance the building's value with a new tenant."

Hooper says that the vendor, a private investor, is seeking interest either from tenants, owner-occupiers and/or investors and is open to all options.

"This is the largest and closest building of its type and quality to the CBD currently for sale and these are corporate-quality offices in one of the best industrial locations in the country. Seldom do properties of this combined size, quality and location come up for sale or lease."

Hooper says Penrose is a tightly held area for commercial property and the attractive, functional property will have broad appeal due to the future capital and rental growth of the location.

"It will also appeal to potential owner-occupiers and tenants too, as it is a high-quality, modern space that will serve their interests well."

Occupying a 9080sq m site, the buildings comprise a 4349sq m warehouse and 1382sq m of support offices constructed on two levels which were specifically designed and built for L'Oreal.

The warehouse has 7.5m stud to the knee of the original warehouse and 8.5m for an additional section added during the building's original construction. It also has three motorised access doors, each 4.5m wide by 5m high, plus a cantilevered 135sq m canopy providing weather protection.

The building was leased in 1998 for 12 years to L'Oreal and returns a net rental income per annum of $787,960.72.

Goldfinch says the property is located in the "industrial golden triangle" of Penrose, on the west side of Hugo Johnston Drive, just over 300m from Church St and a similarly short distance again from the SH1 Southern Motorway. The Auckland CBD is about 9km away.

"This is one of New Zealand's premier industrial locations," says Goldfinch. "L'Oreal's neighbours include Sharp, World Vision, Carter Holt Harvey and BJ Ball.

"Penrose is keenly sought by occupiers and investors - particularly by exporters and importers - due to its closeness to the Auckland CBD and motorways. In addition, it is surrounded by high-quality pools of labour in the surrounding residential suburbs."

Goldfinch says the large size of the building complex at 65 Hugo Johnson Drive is also a rarity for Penrose, which is mainly made up of smaller, "old fashioned" facilities.

"In comparing the main market indicators in the East Tamaki/Highbrook precinct with Penrose/Onehunga, vacancy rates are fairly similar, at around 6.7 per cent to 6.8 per cent. However, vacancy levels of quality facilities are closer to 3 per cent as the blended averages take into account B and C-grade property, which tenants and owners do not favour," says Goldfinch.

Rental rates range from $100 per sq m to $120 per sq m overall for prime warehouse space in those precincts. In terms of investment yields, Mt Wellington and Penrose/Onehunga tend to be marginally firmer than Highbrook.

Goldfinch says that despite the economic downturn, leasing activity has continued steadily in Penrose.

"Tenants prefer high profile, high quality properties to insulate their businesses against the downturn. Low quality, poor location properties are finding it tough to attract tenants," he says.

Sales figures collected by Colliers International and Property IQ show that the rental gap between prime and secondary premises has widened.

However, land values in Penrose stabilised over 2009 after dropping from the record highs achieved in early 2008. "In general terms values range between $325 per sq m and $400 per sq m in Penrose/Onehunga," says Goldfinch.

This combines with results from Colliers' September quarter investor confidence survey, which show that confidence levels across the entire country are rising sharply, continuing a positive trend shown in the previous survey in June.

In the main centres, the sharpest rise in optimism over all commercial property sectors has been recorded in Auckland, which jumped from minus 45 per cent in June to minus 19 per cent in September this year.

"The Auckland investment market has entered a period of consolidation," says Goldfinch. "Auckland prime market yields have stabilised between 7.75 per cent and 8.75 per cent so good quality, well-located properties such as 65 Hugo Johnston Drive are still keenly sought after."

Hooper says that groups of private investors and high net worth individuals are clubbing together to acquire larger industrial assets. "However, to be of interest to these discerning buyers, a property needs to be of excellent quality and location - which is what we are offering at 65 Hugo Johnston Drive."