Activity in the Hawkes Bay commercial property market continues to be strong. A number of sales have recently been completed which continue to show low yield rates provided the buildings, tenants and lease conditions are sound. (as shown to the left)
Economic commentators are predicting the Reserve Bank unlikely to lower the Official Cash Rate below the current 1.75% and that there are signs inflation is beginning to lift. These factors could have an effect on the historically low yield rates currently experienced.
Another interesting aspect in the local commercial market has been the strengthening of interest in motel properties, both the freehold and leasehold interests, this being in response to increased visitor numbers and occupancy levels, a trend which is forecast to continue in the medium term.
The freehold interest in a twenty unit complex in waterfront location has very recently sold at a yield of 6%.
As reported in our Spring Newsletter, rental levels for retail and office accommodation has remained relatively flat.
The above sales provide some examples of properties with varying risk elements and the yield range currently prevailing in the market. The Napier Road and Wellesley Road sales, and the sales outlined in our Spring 2016 newsletter illustrate the “blue chip” yield range, from where yields increase as the different risk elements of the respective properties impact on their saleability.