Demand higher, yields lower in Hamilton commercial property
14 October 2013
Demand higher, yields lower in Hamilton commercial property market
Hamilton, New Zealand – Lodge Real Estate in Hamilton, the city’s largest agency by volume, reported today that its commercial property division is experiencing year-on-year increases in sales volumes as inquiries from investors outside the region sit at a six-month high.
“Unlike the residential property market, which has been on the road to recovery for around 12-18 months, the commercial property market, by its very nature, has lagged behind.
“During the past six months, however, we have seen a noticeable increase in investor inquiries primarily from Auckland, but also the Bay of Plenty and as far away as Taranaki.
“For Auckland investors, first of all they can afford properties here and second of all they get better yields out of tenanted properties. Investors, both locals and those outside the area, have confidence in the city’s business market overall. Hamilton’s commercial property market certainly has gained a reputation as a prudent investment,” explains Vaughn Heslop, Lodge Real Estate commercial agent.
Commercial property investors, however, are accepting lower yields on high quality tenanted properties than ever before.
“Historically, property investors look to gain around an 8% net yield1 on commercial property and 7-8% gross yield on a multi unit residential dwelling. In recent years, investors have rated the value of an investment based solely on its cash flow.
“Now we’re seeing capital gains factored in as investors make their purchase decisions. The result has seen investors willing to accept under 7% net yields on commercial property and as low as 6% gross yield on the best multi unit dwellings. That’s because they are confident values are on the rise,” explained Mr Heslop.
Dean Abraham, Lodge Real Estate commercial sales and leasing agent, also said the Hamilton market is seeing an increase in commercial leasing activity.
“With a positive sentiment in the Hamilton business community, companies are much more confident in committing to long-term leases. Also, with the changes in Council regulations making it more difficult to convert residential properties into offices, this has led to more businesses moving into the central business district which is great for the inner city,” he explained.
In the residential housing market this month, September figures were released today by the Real Estate Institute of New Zealand (REINZ) showing Hamilton’s median house price has increased to $355,000 from $327,500 in August. This compares to a median of $332,750 in September 2012.
Managing Director of Lodge Real Estate, Jeremy O’Rourke, said, “Listed stock remains low, with a continued shortage of quality homes in the $400,000-$500,000 bracket.”
The number of homes sold in Hamilton during September was 253, virtually on par with the 261 sold in August 2013 and way up compared to the number sold in September 2012, which was 196. The average number of days it took to sell a residential property in Hamilton during September was 31 days, compared to 37 days in August 2013.