DIY property investors set to nail high-profile Bunnings premises
One of the Hawke’s Bay’s biggest retail land and building sites has been placed on the market for sale.
The expansive 4,600 square metre Bunnings store on the corner of Market Street North and St Aubyn Street in Hastings sits on some 7,178 square metres of land overlooking the main arterial route through the city. Included in the site are 102 tarsealed car parks.
The building and freehold land, are being marketed for sale through a tender process being managed by Bayleys Hawke’s Bay. Tenders close on March 9. The building previously housed the Hastings branch of The Warehouse.
Bayleys Hawke’s Bay salespeople Paul Garland and Rollo Vavasour said the Market Street North/St Aubyn Street building was constructed in 1994, with a goods unloading extension added a year later, and new internal walls installed in 2014.It was refurbished last year before home improvements and outdoor living retailer Bunnings took up its tenancy.
Bunnings has a current new five year lease on the property - returning a net income of $450,000 per annum. The lease runs through to 2021, with two further five year rights of renewal, including annual rental increases of 2.5 percent, As sole tenant, Bunnings pays outgoings such as council rates, insurance and water charges.
Mr Garland said the building was constructed with a combination of precast concrete panels topped with profiled steel cladding – giving the building an Initial Evaluation Procedure (IEP) rating of 75 percent. The end bay has a mezzanine level containing offices and staff amenities such as a kitchenette and lunchroom, as well as toilets.
The property has a ratable value of $4.62 million – comprising $2.51 million for the land and $2.11 million for the building, which is zoned commercial 8C. Mr Garland said the building sat alongside other large format retail outlets such as The Warehouse, Mitre 10 Mega, Farmers, K-Mart, and Harvey Norman.
Bunnings is one of Australasia’s biggest home improvement suppliers and outdoor living product retailers – supplying both trade accounts and the public. Over the past two decades the company has achieved a compound sales growth of 16.1 percent.
Bunnings is owned by Australian retail giant Westfarmers whose associated brands include Liquorland, Kmart, Target, and Coles. Westfarmers has a market capitalisation of AUD$48 billion.
Mr Vavasour said Bunnings was attracted to the site because of both the 174 metre road frontage onto Market Street North and the 16,000 vehicles which passed by the entrance gates on a daily basis.
“The investment scenario of having a very strong tenant on long lease terms, combined with a modern building in a good part of town from a retailing perspective, means the Market Street North/St Aubyn Street premises will be an attractive opportunity for passive investors,” Mr Vavasour said.
The latest retail real estate market analysis by Hawke’s Bay property valuations firm Turley & Co reports that Bunnings’ relocation to the Market Street North/St Aubyn Street site was part of a substantial exodus of large format retailers near to The Park Megacentre precinct.
“Briscoes and Rebel Sports relocated to The Park Megacentre in December to position alongside other large format retailers Noel Leeming (who joined in 2015), Mitre 10 Mega, the Warehouse and Uncle Bills. Meanwhile, PK Furniture joined Warehouse Stationery at the former Mitre 10 address,” said the Turley & Co report.
“Considerable vacant space (in the greater Park Megacentre precinct) has been backfilled by a handful of new and existing national and Australasian retailers. These retailers are positioning themselves for competitive advantage and future growth, but also potentially drawing some consumers away from the high streets.”
Mr Garland said there was a strong appetite for large investment premises in Hawke’s Bay’s retail sector – with sizable funds actively looking to come into the region from Auckland when suitable properties were placed on the market.
“Spearheading this trend was the sale last year of The Warehouse Hastings property which sold for $17.56 million for a yield of 6.53 percent to an Auckland investor. This was the most substantial commercial property transaction in the province in 2016,” Mr Garland said.
“Also notable in the Bay’s investment property category was the sale of Edgewater Motor lodge in Marine Parade which was sold by Bayleys for $3.75 million to a Napier investor for a six per cent yield. Interestingly though, several of the under-bidders were from Auckland.”
“On this trend, and bearing in mind that much of Auckland’s quality commercial and well-tenanted industrial-classed stock is selling at yields below or around five percent, it is highly likely that the buyer for the Market Street North/St Aubyn Street property will come from Auckland - searching for a higher yield opportunity than can be achieved in the ‘city of sails’.”