Stock shortage in high demand market

Industrial property remains the most sought-after asset class. Photo / Supplied

Prime commercial property investment stock remains in short supply, particularly in the Auckland market, says Gareth Fraser, Auckland director of Colliers International's investment sales team.

"However, it's still possible to find good commercial properties at all price points – as reflected in our latest Colliers Portfolio released yesterday," Fraser says.

"Among the 26 listings are three early childhood education centres, nine industrial properties ranging from entry-level units through to large warehouses, and five development opportunities.

"Many of these investments properties have desirable attributes like long lease terms to government tenants."

Fraser says industrial property remains the most sought-after asset class. "Industrial yields on prime investment stock continue to contract and set new benchmarks.

"The success of recent industrial property syndications also underpins demand, particularly at entry level. These syndications allowed retail investors, including mums and dads, to invest in industrial property at a lower price point.

"This is proving hugely popular. The last two syndications of New Zealand industrial properties marketed by Colliers International were both oversubscribed."

Fraser says New Zealand's commercial property market continues to outperform the residential market, with high demand showing no signs of abating.

"While access to capital has improved, rising construction costs and little movement on land prices have resulted in minimal new commercial construction coming on-line within the last six months.

"The lack of new stock means many investors are continuing to hold onto prime assets – and when high-quality stock does come onto the market, it is very keenly sought after.

"However, against this backdrop, we've seen a welcome uplift in market activity this year.

Among the recent larger deals brokered by Colliers are the $209m sale of Goodman's Central Park office complex in Greenlane, the $40m sale of SkyCity's Federal Street Car Park, and the $23.3m sale of a seven-storey office building at 75 Karangahape Rd.

Fraser says an emerging trend is a growing gap in the market between high-quality stock and secondary stock.

He says the middle of the year is good for buyers. "There's more stock on offer at present and not as many buyers to compete with, partly due to school holidays and the Northern Hemisphere summer."

Gareth Fraser, Colliers International