Pro Commercial property

CGT debate over, a flying start to 2019 set to continue

Now that the debate about the introduction of a comprehensive capital gains tax is out of the way, we expect confidence to build further in the commercial property sector over 2019.

Starting with such a strong base to grow from, with over $138 million in commercial property sold in 2018, up from $116m the previous year, we knew 2019 would be off to a flying start. But, CGT discussions did muddy the outlook despite positive deals concluding as was recently showcased with a notable sale at 96 Austin Street leased to FPG, a world-leading food display and retail solutions business based in Hawke’s Bay.

This is one of the largest industrial sales Hawke’s Bay has seen for many years with the leasehold and freehold sold for a total of $15.620m.

There are already a number of positive sales and leasing transactions under negotiation that will create further market confidence, especially with no additional capital gains tax requirements. Providing market confidence in Hawke’s Bay’s future activity is the great wave of economic positivity we are experiencing.

Data from Statistics New Zealand, ASB Bank and research entity Infometrics are all fairly consistent in their assessment of our region’s economic prosperity.

They all show a rise in Hawke’s Bay’s population, GDP, employment, the number of businesses, agricultural outputs, construction activity, household income and retail spending. Not only has the many positive indicators provided ongoing confidence, it has translated into higher property sales turnover and supported steady leasing activity in the region.

Significant investment forecast in both infrastructure and construction over the next few years will also assist deliver new growth opportunities.

Development in Irongate, Omahu Road and Whakatau are growing in popularity due to the opening of the expressway extension.

As such, we see Hawke’s Bay remaining as one of the most confident markets in New Zealand, with enquiry from all over New

Zealand setting record prices for quality property, and investment yields in the 5 to 7 percent range.

Hawke’s Bay remains a safe-haven for investors, with strong population growth and a booming regional economy. The latest quarterly Commercial Property Investor Confidence Survey, released in March showed a net positive 22 percent (optimists minus pessimists) of respondents expected investment conditions to get better over the next 12 months.

This was broadly in line with the last four quarter survey results. Napier/Hastings had a standout result with a net positive 24 percent – the highest on record since the survey began almost a decade ago.

Considering the survey was undertaken during the release of the Tax Working Group’s final Future of Tax report, it is easy to expect higher confidence in market activity now.

When we look at each property sector in more detail, we note that the office sector continues to show solid tenant demand and especially low vacancy rates in Napier and Havelock North.

To release some pressure more premium stock will come to the market in Hastings, with The Tribune redevelopment, One Havelock Road in the Village and The Hastings Hive offering shared office

spaces for tenants looking to accommodate 3-15 staff in flexible leasing solutions.

Retail property is also experiencing a boost due to ongoing growth in retail spending. Retail Electronic card transactions data from Statistics NZ show core retail spend aggregated to $55,487 million for the annual year to February, climbing 4.4 percent from the previous year. The industrial sector which is getting a boost from logistics, warehousing and manufacturing sectors means demand for space remains high. We continue to see tightening vacancy rates across the Bay, particularly Onekawa which is already at historically low vacancy levels. This supports property fundamentals in an already strong investment sector.

While activity is expected to increase, supported by positive market conditions, continually unlocking opportunities can be challenging. If you are unsure of your next leasing, purchasing or selling move, or would like some more information on latest market activity, please get in touch with me.