Commercial values set to rise in next two years
The spectre of rising rents in the Auckland office market has seen New Zealand's listed property sector rated as "fair value" by sharemarket research house Morningstar.
Morningstar said the sector would continue to perform strongly on the back of New Zealand's strong economy.
All the sector's stocks offered relatively attractive yields, but Morningstar followed three specifically: Precinct Properties, Goodman Property Trust and Kiwi Income Property Trust (KIP).
All three offered "respectable" unfranked yields of 5 to 6 per cent, said Morningstar analyst Nachi Moghe.
Despite rising interest rates, he expected commercial property values would rise for another one or two years.
This he said was due to buying competition from overseas sources and some capital upside from underlying property income.
Stocks with a heavy weighting towards Auckland office properties were likely to do the best, as supply was muted and vacancy rates were low, setting the scene for rent rises.
Moghe rated Precinct Properties and Goodman as the most likely to surprise on the upside.
Precinct received 60 per cent of its rental income from Auckland and was "influential" in the move of the central business district towards the waterfront where it was positioning itself.
Goodman Property, whose portfolio of business parks and warehouses was 92 per cent weighted towards Auckland, was also expected to see solid rental growth and to save costs from a reducing land bank.
A third of KIP's portfolio was weighted towards offices but upside from firming rents would be limited because its recently completed ASB North Wharf office block had fixed-rate rent reviews.
KIP's office rents were also slightly higher than market rates, so any uplift in rents would be modest, he added.
RECENT SALES AND LEASINGS
Auckland North 11 Parity Place, Wairau Valley
A 440 square metre industrial building with three roller doors on a 814sq m level site sold with vacant possession for $810,000. Sold by Alex Stever and Trevor Duffin, Bayleys North Shore.
Auckland Central 458 Great South Rd, Greenlane
A 787sqm car yard with a 205sqm showroom occupied by Winger Motors since 2011 has sold for $2.25 million at a 5.3 per cent yield. Winger has renewed its lease for another three years from August, with a further right of renewal. Net annual rental income $120,000 plus GST. Sold by Mike Adams and William Coates of Bayleys Auckland.
Auckland South Unit 8, 2 Bishop Dunn Place, Botany South
A 210sqm commercial unit in Bishopsgate Business Centre was sold for $670,000 at a 6.2 yield. It had an established tenant, a vet nurse training centre, which renewed its lease for a further three years. Annual net income $41,800 plus GST.
Hamilton 114 Alexandra St
A freehold two-level office building with a floor area of 1460sqm in Hamilton's CBD has sold to local investors for $1.1m through Colliers International brokers Mark Brunton and Justin Oliver. Reid House accommodates 16 tenancies of mixed retail and office use on a 783sqm site.
Otaki 34 Main St, Otaki
A 456sqm shop on a 776sqm corner site with a long-standing tenant, Ballentynes, was sold for $160,000. Sold by Andrew Smith and John Pritchard of Bayleys Wellington.
Wellington 7-9 Parliament St, Lower Hutt
Two interconnected industrial warehouse buildings with a lettable area of 925sqm on a 884sqm high-profile site was sold vacant for $1.3m by Andrew Smith of Bayleys Wellington.
Sunday Star Times