All indicators are pointing towards the market building on the momentum created over the last two years. After a strong finish to 2018 with over $138M commercial property sold by Colliers Hawke’s Bay, a substantial pick up from $116M the previous year, and over 88 leases concluded, generating over $4.4M of revenue for Hawke’s Bay Landlords.
Already 2019 has started off with huge investor demand with a continued tenant enquiry across the board with new developments underway and many in the pipeline. The market has undergone tremendous growth in the last two years which we certainly expect to grow.
Data from Statistic New Zealand shows a rise in Hawke’s Bay’s population, GDP, employment, the number of businesses, agricultural outputs, construction activity, household income and retail spending all of which has been filtering through to building confidence. Not only has the many positive indicators translated into high sales turnover, but it has supported leasing activity in the region, which remains steady.
The level of interest in the region is significant, with out-of-town investors scouring the market as the availability of high-grade property continues to tighten in the major centres.
These investors are actively searching for opportunities with yields predominately between 6 percent and 7 percent for prime quality properties, with some exceptions for the right location and a strong covenant.
Throughout 2018 41% of investment properties sold by Colliers Hawke’s Bay was to buyers from outside of the region, highlighting the confidence in the region’s commercial market, as well as the level of outside interest.
Since we’re at the start of the year I thought I would provide some predications for 2019.
Total annual sales value of commercial office, retail and industrial property in 2019 nationally fell just shy of the forecast $10 billion for the year of 2018. This is due to additional legislative compliance and potential tax changes in 2019 that will add complexity, costs and time delays to the sales process. Approximately 85% of the properties that will sell in 2019 will have an asset value of $2M or under and be highly sought after by investors and owner-occupiers.
The occupier preference for quality space is still hugely apparent which will continue to prove challenging for owners of low quality, seismically poor premises. While the focus remains on the top end of the sector, which will see modest rental growth in the next 12 months, premises at the lower end will likely struggle to lift rents from current rates. Quality office accommodation in Havelock North is in high demand, stage one of Joll Road development is all leased bar 190m2, with stage 2 likely to start construction Q4 19. One Havelock Road has approx. 1400m2 coming to the market soon, with a start date for construction yet to be announced. The redevelopment of the Hawke’s Bay Today buildings in Hastings is underway, with remaining tenancy spaces available from approximately 90-2000m2 which we expect will be snapped up quickly.
Industrial precincts across New Zealand will experience an increase in occupier demand that will require a new wave of development activity in 2019. This will lead to one of the biggest years of uncommitted industrial developments commencing. Development in Irongate, Omahu Road and Whakatu with the opening of the expressway extension will all continue to be in high demand.
Physical retail stores capture almost 90% of worldwide retail sales, according to eMarketer, but it will be a challenging year ahead for many retailers as online and offline competition mounts and discretionary spending becomes more selective in 2019. This will see a re-rating of retail asset values in 2019 with those likely to experience uplifts
being the owners of assets with supportive demographic catchments, not overly weighted towards clothing and fashion and those transitioning into more experiential, entertainment and food and beverage offers.