Land prices drive Chch investors away
"Speculative" land prices in central Christchurch had driven Goodman Property Group away from an interest in helping redevelop flattened areas.
The prime City Mall block is one site where land prices have gone above pre-earthquake prices to an illogical level, Goodman says.
Several developers have ended up standing in each other's way after buying up land in the mall area south of Cathedral Square.
In 2012 and early 2013, a $350 million Goodman-Westpac project was part of the early mix of contending projects.
In recent months, Goodman went quiet despite receiving resource consent late last year.
It is believed Goodman's previous anchor tenant, Westpac, has switched its interest to a rival project backed by Leighs Construction.
Goodman chief executive John Dakin yesterday explained why any central business district (CBD) move had been put on hold around Easter time after 12 months of investigations. Amalgamation of sites was key for any larger development, he said.
In Christchurch the prime focus was now on Goodman Property Trust assets which include holdings within or ownership of three key areas: Show Place in Hornby, the Glassworks Industry Park, in Hornby and the Southpark Industrial Estate in Middleton.
"We did look really hard at the CBD. We thought if you could do something of real scale, working with the Government and the Government taking an active role in terms of amalgamating land and committing to long-term leases . . . [but] we don't get the feeling there is that level of commitment there from the Government to enter the land market."
At around Easter, Goodman had decided that Christchurch central and the City Mall project was no longer worth pursuing, given the "speculative" buying of land around that project.
"You've got sites trading in some cases at prices twice what they were before the earthquake . . . That's illogical."
"Until the economics sort themselves out, I don't think you're going to see a significant institutional investor."
Leighs Construction and Ocean Partners both also have had consented plans for the mall.
"If we stand back and look at the risk and reward at the moment, we're not seeing returns in the CBD any better than anywhere else we can get them, and this is on the global basis, and obviously the risk around that [CBD] is quite high at the moment," Dakin said.
Goodman is a listed integrated commercial and industrial property group that owns, develops and manages real estate including warehouses, large logistics facilities, industrial estates and business.
Goodman would continue with further developments at its existing commercial and industrial property sites, Dakin said. The demand for commercial property was strong, but it was still hard to get commitments from potential tenants to get developments across the line, he said.
Westpac did not respond to calls yesterday.