With so many large residential property deals getting headlines, it's easy to forget about the really big fish in the world of real estate. Commercial property sales of $3.8 billion have been recorded in New Zealand over the year, including some massive deals in the Auckland city centre. According to a report from Colliers International, major office transactions led the way, with strong interest from syndicators and overseas interests.
In the year ending June 2018, commercial property sales of assets $5 million or above declined by $4 billion in New Zealand to a total of $3.8 billion. The most interesting development was the rise in office sales activity, due mostly to an unprecedented amount of interest from offshore buyers. The office sector saw sales levels reach $2.3 billion for assets $5 million and above, a massive 1.4 times bigger than the figure recorded in 2017.
Significant sales included Goodman selling their VXV portfolio to Blackstone Fund for $635 million, the sale of the Central Park Corporate Centre to Oyster and KKR for $209 million, and the sale of the ANZ Centre to US Fund Invesco for $181 million. The vast majority of office sales activity took place in Auckland, which recorded $2,004 million worth of sales compared to just $1,146 million at the same time in 2017. Office sales activity in Wellington and Christchurch was insignificant in comparison, with $305 million and $230 million recorded respectively.
International buyers were responsible for most of the big sales, with 54 percent of all office sales above $20 million sold to overseas investors. The 46 percent of sales that went to domestic interests mostly went to syndicators, with Auckland the favoured destination for investment at 86 percent of all office sales. With so much of the New Zealand commercial property market dependent on overseas money, Colliers recently welcomed the proposed revisions to foreign buyer restrictions.
Recent restrictions enacted through the Overseas Investment Amendment Bill may be relaxed, with foreign buyers now allowed to hang on to apartments or houses brought off the plan, and Singapore joining Australia as the two nations exempt from certain Overseas Investment Office restrictions. While foreign buyers will still not be allowed to purchase existing standalone homes under the changes, this will not affect the amount of overseas money involved in the commercial property sector.
The Colliers' report said that big deals were driven mostly by investor optimism, with a lack of prime stock availability also leading to rental uplifts for landlords. According to the report, "Prime average yields have also reached record low levels in Auckland [5.5 per cent] and Wellington [7.5 per cent], the lowest since the global financial crisis. Impressively, Christchurch reached record low yields historically at 6.6 per cent in June 2018." While not making the same waves as office sector growth, overall confidence by commercial property investors was up in Wellington and Christchurch and only slightly down in Auckland.
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