The commercial real estate market remains strong even though I have estimated only 18 Bona-fide sales have occurred since January 1 this year Click here to view sales. With interest rates on the rise we expected a slow down with enquire for both investment property and owner occupier property, this has not been the case. We achieved a sale in February of this year before the interest rate rises of a 5% yield; a modern building, strong tenant and potential for a small rent increase in December. We have also just completed sale for an investment property at 6.74% yield. This property attracted several potential buyers, with two tenders received at the close of tender time. Cutlers have also been marketing a reasonably modern (1980s) tilt slab industrial building for sale with vacant possession and have had over 10 inspections and  have received an offer at a 6.14% yield on a suggested market rent.

The reason for the low number of sales is the lack of stock coming on to the market for both investment buyers and owner occupier buyers. Analysing the sales, we believe that 10 of the sales were investment type sales and the balance to owner occupiers or development sites. One sale of note was the freeholding of a piece of endowment land at $650m2.

In summary even with all the negative news surrounding the residential market, rising interest rates and talk of a recession, Dunedin’s commercial real estate market is in pretty good shape. With building costs ever increasing, second-hand commercial property will still be in hot demand for the foreseeable future. We think the new hospital build is helping the commercial market and Jacquie and I are seeing a number of trade related business looking to buy or lease premises in the area.

Leasing over the last 6 months has slowed up somewhat, with enquire a bit stifled across the board. Industrial space is still at a premium with very little space available to lease. Ideal space size to lease is between 300m2 to 500m2 with the larger proving a bit slower. Rents have remained similar for the last 6 months at $100m2 to $130m2 plus outgoings for prime space, although new builds achieve higher rates due to land and building costs and the developers need to achieve a return on their investment.

Office space: A Grade office – very few vacancies on the city, however, also fewer enquiries for this level of space. Most enquiries are coming through for single offices in the lower end of the rental range. Retail Space – also fewer enquiries, which reflects the market nationally. The odd enquiry for retail space in the fringe of the city, reflecting the budget level of the enquirers. Please see Adam Binns report  on George St vacancies ​​​​​​Click here to view George St vacancies.
If you would to have a chat over a coffee give either Graham or Jacquie a call.