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May 9, 2017 10:54:44 AM

Insatiable demand for Hamilton investment property

Topics: Commercial, NAI Harcourts, Press Release, Commercial Property, New Zealand, News, media release 0

Hamilton investment properties remain in hot demand at the moment, particularly for those below $1m and even more so for those below $500,000. 

According to Managing Director of NAI Harcourts Hamilton, Mike Neale “Industrial and suburban retail properties appear to outperform all others, due to the limit in supply and future versatility. For those above $1m and especially over $2m, purchasers are increasingly discerning and carrying out thorough due diligence, with a view for quality tenants, long leases, structurally sound buildings, and hopefully future growth potential or upside. Investors are looking to mitigate risk factors, so split risk assets for larger assets is being viewed favourably.” 

There has been steady enquiry throughout the Hamilton commercial market so far in 2017. 

“With sales listings not always easy to secure, those genuine vendors that go to the market are benefiting from competition – proof with our last auction campaign selling 9 out of 12 in March,” says Neale. 

With one new agent about to start and two more likely within the next six months, NAI Harcourts Hamilton will have the coverage required for the Hamilton market. “We will have a strong balance of experience and new enthusiasm. All the new agents are coming from outside the industry, this is an approach that has served us exceptionally well in the past,” adds Neale.   

With banks tightening on lending, Neale believes this is having an impact, predominantly in terms of development funding, but also for investors and businesses. Neale says it is likely that yields for prime property will remain low, but with a possible softening in yields for other properties, as purchasers become more discerning due to an increasing number of properties coming to the market. 

“We believe we saw the peak of the market in mid-late 2016, but in saying that there does not appear to be any risk factors which point towards to any significant decline – it now appears to be a more stable market going forward. With interest rates having risen somewhat, it is inevitable that yields for non-prime assets will soften,” says Neale. 

Vacancy rates in Hamilton are the lowest they have been in over 10 years. Office space is at 7.2%, retail space at 6.2% and industrial space hitting a low of 2.3%. There continues to be strong demand for industrial space, with well-priced and cost effective retail and office space also seeing steady demand. The suburban retail market continues to see increasing rental rates, as new builds become available due to Hamilton’s growth. It was recently reported that Hamilton will be New Zealand’s second largest city within 25 years.  

With industrial vacancy rates at around 2% there is a consistent shortage of property for sale or lease. Several new unit complexes are planned, with several others under construction currently. Several large tracts of industrial land is held by a limited number of players in the market. 

There is continued confidence in Hamilton with ‘Ports of Auckland’ developing an inland port in North Te Rapa. Tainui Group are about to announce an operator for their new inland port facility in Ruakura which has just commenced site works. 

The suburban retail market performs exceptionally well in any market and with continued limited supply, nothing is likely to change here according to Neale. 

Neale believes the issue that Hamilton faces with development land, whether it be residential, commercial, or industrial, is having the infrastructure in place. This remains a significant challenge for Hamilton City Council and in particular the funding required to achieve this. 

The Hamilton CBD has certainly turned a corner with a significant number of new developments under way or having just been completed – Genesis Energy, Department of Corrections and ASB. These together with high quality, cost effective refurbishment projects are repositioning the office stock and creating strong demand throughout the office sector. 

The Hamilton CBD is fortunate to now have a number of developers, local and national, playing their part in assisting with this evolution. The new Hamilton City Council District Plan has also seen an emphasis on more residential development in and around the CBD, which allows for greater intensification and the conversion of more difficult to lease upper floor office space to apartments. 

Neale believes it to be a good time to consider buying. “While we appear to have seen the peak in the market, strong immigration and tourism is likely to continue, which bodes well for Hamilton due to its proximity to Auckland and the Bay of Plenty. With house prices, half the value of similar properties in Auckland, commute times to work are significantly less and yields for purchasers are almost without exception higher. With what we see going on in the rest of the world, New Zealand is continually seen as a safe haven for people to live and also to have your money.”