Retail outlet sales a 'flight to quality'

A multi-unit retail block at 135 Pakuranga Rd occupied by Westpac Bank has sold for $2,318,888. Photo / Supplied

Four retail outlets in Pakuranga Rd featured in Bayleys' Autumn Total Property portfolio have all sold, at a total value of $6.68 million.

Two leased to Westpac Bank and Air New Zealand and located in a retail complex next to Westfield's Pakuranga Shopping Mall both sold at a yield of 6.4 per cent to the one purchaser through Mark and Rachael Pittaway, of Bayleys Manukau, and Mark Sun, of Bayleys Auckland.

A 283sq m outlet which Westpac has occupied since 1993 in the multi-unit retail block at 135 Pakuranga Rd sold for $2,318,888.

Mark Pittaway says Westpac reinforced its commitment to the high profile location by varying the terms of its lease in 2005 to take up a six-year renewal and create a further three rights of renewal of six years each.

The premises are producing net annual rental income of $149,000.

A 193sq m outlet two doors down, which Air New Zealand has also tenanted since the retail complex was built in the early 1990s, sold for $1,731,188. The unit is occupied by an Air New Zealand Holidays outlet and is producing net rental income of $110,000 per annum. Its current lease runs until August 2012 with three further three-yearly rights of renewal.

Pittaway says the properties are part of a row of premises on the northern perimeter of the shopping centre which also include ASB and Post banks, other travel centres, real estate agencies, restaurants and cafes.

The sold units have good exposure to vehicles entering the shopping centre from Pakuranga Rd with parking directly in front of the premises in addition to the shopping centre's multiple carparks.

"Each of these unit title properties is privately owned and does not have any association with the shopping centre apart from sharing the significant customer base and carparking," says Pittaway.

In his introduction to Bayleys' latest Winter 2009 Total Property portfolio, Bayleys Corporation managing director, Mike Bayley, says yields on properties occupied by blue chip tenants, such as banks, have moved little from when the market was at its peak. However, there is now a much bigger gap in yields between what investors perceive as prime and secondary properties.

"When markets face challenging times there is 'flight to quality' among investors. It's a well-worn cliche but one which holds true for all investment markets, not just property," says Bayley.

Property investors in the current market are focused on the age-old fundamentals of location and the strength and length of the tenancy, he says. This was also reflected in Bayleys' sale at auction last month of all 22 retail outlets in the Lincoln North Shopping Centre in Henderson, with 12 selling at yields of 6 per cent or less.

"This is not to say there isn't interest in second tier properties," says Bayley. "A shortage of prime property for sale, and the consequent lower yields and higher prices they command, means there are buyers prepared to take a punt on properties that don't quite tick all the boxes. However, they do expect the additional risk they are taking in purchasing such property in an uncertain business environment to be recognised in pricing."

A 554sq m Asian grocery store in the Highland Park Home and Entertainment Centre, at 491 Pakuranga Rd that also featured in Bayleys' Autumn Total Property portfolio, sold for $875,000 at an 11.7 per cent yield through Ben Jones and Tony Chaudhary of Bayleys Manukau.

The tenant is Hanyang Howick Co, a Korean company selling a wide range of Asian and Korean goods. The store was established in 2004 to tap into the growing ethnic population within east Auckland. The company has an eight-year lease running until February 2012, with rights of renewal for a further eight years.

The other property to sell, located across the street at 490 Pakuranga Rd, was a freehold 2800sq m site with a vacant 227sq m building which was bought by an owner-occupier operating in the retail sector for $1,755,000.

Once occupied by a Pizza Hut restaurant which opened in the 1980s, it was sold by Mike Adams, of Bayleys Auckland, with Gordon Gibson and Geoff Wyatt, of Bayleys Manukau.

Adams says there was strong interest in the site which has excellent exposure to passing traffic on the homeward side of Pakuranga Rd, one of Auckland's busiest arterials.