Colliers Portfolio | Issue 3 2023

Recent Deals

Shop 3, 27 Rees Street, Queenstown

Leased by Mary-Jo Hudson

24 Hannigan Drive, Saint Johns, Auckland

Leased by James Dickey, Ben Cockram, and Mike van der Putten

7 Bill Stevenson Drive, Drury Auckland

Leased by Josh Franklin and James Dickey

18 Margaret Place, Queenstown Sold by James Valentine

SOLD

126 Portage Road, Ōtāhuhu Auckland

Leased by Paul Jarvie, Brad Johnston, Ben Herlihy, and Dhiru Patel

3 Ikahara Street, Paraparaumu Sold by Dean Anderson

835 Frankton Road, Queenstown Sold by Rory O'Donnell and Mark Simpson

83B Boundary Road, Papakura Auckland

Leased by Josh Franklin, Mitch Broderson, Shoneet Chand and Matt Prentice

Contents

Welcome to the third edition of Colliers Portfolio for 2023.

As we move into the second half of the year, some clear trends are emerging in the commercial property market across New Zealand.

There has been strong activity throughout the country with a particular uptick in the regions and the South Island.

This activity has been underpinned by the investor market returning to life with our recent campaigns generating increased interest, which has led to a larger number of offers and buyers than we saw in the earlier stages of the year.

Yields are settling across the asset classes and reflect a balance between the desire to acquire and acknowledgment of funding costs, as prospective purchasers continue to navigate a challenging interest rate environment alongside their appetite for risk.

Vendor expectations have moved to meet the market, which is resulting in increased sales volumes and adds to an improving market sentiment.

Our latest edition of Portfolio features listings from across the commercial property spectrum, including a Countdown in northern Auckland, a large-scale retail building that is tenanted by The Warehouse in Tauranga, and industrial offerings in Hawke’s Bay, among many others.

Thank you for your continued interest in Colliers Portfolio, our national sales team has an outstanding range of investment opportunities available and looks forward to hearing from you.

David Burley

Director

Colliers Portfolio

4

Colliers Portfolio

Napier Industrial Investment Investment Opportunity

22 Dunlop Road, Napier

Tender closing Tuesday 25 July 2023 at 5pm Unless sold prior

Zoned Main Industrial

3,573m² freehold land

Built

Strong

net lettable floor area, predominantly made up of 1,211m² workshop, 692m² canopy and 130m² office/ amenities. The buildings are situated in the heart of Napier industrial and sit on 3,573m² freehold land, with multiple access points off Taradale Road and Dunlop Road.

Calum Ironside

027 698 6996

colliers.co.nz/p-NZL67023925

Napier industrial property with long-term tenant

The land and buildings of a highly functional property that is home to an established tenant in Napier’s industrial hub of Onekawa offers prospective purchasers the opportunity to acquire an asset with a strong tenant covenant.

22 Dunlop Road, Onekawa has 2,268sq m of total net lettable area on a 3,573sq m freehold site that offers dual road access and is zoned Main Industrial under the Napier City Operative District Plan.

The property is home to Reinforcing Steel & Mesh Limited who are committing to a new five-year lease at a net rental of $222,050 plus GST per annum from settlement.

The strategic location provides convenience for the occupants with the Napier Port and Hawke’s Bay Airport both within 6km, while the Napier CBD is approximately 4km away.

Onekawa continues to experience strong demand among industrial tenants with vacancy rates sitting around 1 to 2 per cent. An increase in the supply of quality industrial stock is unlikely in the short to medium-term, putting further pressure on demand.

Calum Ironside, Industrial and Commercial Sales Broker at Colliers Hawke’s Bay, has been exclusively appointed to market the property for sale via tender, closing at 5pm on Tuesday 25 July, unless sold prior.

The property comprises an industrial warehouse that was built in the 1960s and has a main workshop that measures 1,211sq m with a further 183sq m lean-to addition, alongside a 52sq m staff amenities annex.

The associated administration office spans 130sq m and has a 37sq m veranda, while there is also a heavy-duty canopy measuring 692sq m that was added in the early 2000s.

Ironside says the opportunity to acquire an industrial property with a longstanding occupant will be highly appealing for buyers.

“The current tenants have signalled their intent by agreeing to a new five-year lease that also includes two further rights of renewal for five years each,” Ironside says.

“The lease agreement has favourable terms built in, including 3.5 per cent annual increases and market reviews on renewal. These combined factors make this an enticing investment that would be a strong addition to any portfolio.”

The property sits between Taradale Road and Dunlop Road and is surrounded by a range of notable brands such as Vulcan Steel, Tile Depot, and Mitre 10 Mega. There is also a Kmart less than 1km away.

Taradale Road offers excellent connectivity to State Highway 2 opening up the rest of the Hawke’s Bay area and beyond.

“The current premises provides high levels of usability for the existing occupants for their business operations due to the easy access from the street and the generous yard space.

“The nearby area remains keenly sought by industrial businesses given the accessibility to the motorway network and Hawke’s Bay’s transport infrastructure.”

Ironside says when examining all of the pertinent factors in play, this property shapes as an outstanding passive investment opportunity with long-term upside.

“With favourable lease terms and an established occupant in place, this offering has strong underlying investment fundamentals and will pique the interest of discerning buyers.

“I encourage all interested parties to make contact with me immediately to ensure they don’t miss out on this compelling purchasing opportunity.”

5 Colliers Portfolio

NZX Listed Anchor Tenant Split Risk Investment

96 Anderson Road, Whakatu, Hastings

For Sale by Deadline Private Treaty closing Thu 27 July at 4pm (unless sold prior)

Land area: 12,490m²

Floor area: 2,885m²

$425,283 net pa + GST

Growth opportunity

Strategic location Extensive onsite parking

Located in the major satellite industrial area of Whakatu, Hastings, approximately 8 kilometres east of the Hastings City Central Business District, this property provides a unique investment opportunity for those looking to expand their portfolio.

The building provides a split risk investment, with a net rental return of $425,283 per annum + GST. In addition, there is an opportunity to develop the site further with approximately 1,700m² of vacant land adapted to a wide range of uses. The adjacent land provides endless possibilities for expansion and development, making this a fantastic investment opportunity.

available. The mix of buildings accommodates a variety of businesses, and has the potential to be

Danny Blair

021 826 496

colliers.co.nz/p-NZL67024213

Highly visible Hastings property with future potential

A prominent office and industrial property on a corner site that includes a significant parcel of development land in Whakatu near Hastings is being presented to the market for sale.

96 Anderson Road, Whakatu is home to multiple buildings with a total floor area of 2,885sq m on a 12,490sq m site. There is approximately 1,700sq m of vacant land, which could be developed in the future.

Anchored by the offices of the country’s largest apple producer Mr Apple, who are owned by NZX-listed entity the Scales Corporation, the diverse tenancy mix offers a premium split-risk investment opportunity and provides a combined annual net rental income of $425,283 plus GST. The site also houses the only cafe in the area.

Whakatu is a satellite settlement located by State Highway 2, approximately 7km north-east of Hastings and 14km south of Napier.

Within the Whakatu locality there are a number of packhouses, heavy industrial activities, and fruit storage facilities, which are a key part of the Hastings District’s growing economy that saw a 3 per cent increase in GDP for the year to March 2023, according to data from Infometrics.

The subject property can be accessed from both Anderson Road and Station Road and boasts a remarkable profile with over 110m of frontage onto Anderson Road.

Colliers Hawke’s Bay Director Danny Blair has been exclusively appointed to market the property for sale via deadline private treaty closing at 4pm on Thursday 27 July, unless sold prior.

Blair says the main office building at the property spans 2,524sq m and was constructed in the 1960s.

“Since 2013, major refurbishment work began on the eastern half, and the western side was also upgraded. As part of the refurbishments in 2017, the eastern wing was extended to include a new entry and reception area,” Blair says.

“The building is internally partitioned offering a combination of both open plan and partitioned offices for a range of tenants with Mr Apple occupying 1,251sq m of space on a lease agreement that runs until November 2024 and includes three rights of renewal for five years each. They also have access to 60 on-site car parks.”

Sitting prominently on the site, the Whakatu Fire Station was originally built around 1970 and has since been repurposed into a bakery that features a commercial kitchen, as well as both indoor and outdoor dining areas.

The total floor area, including the covered entrance, spans 247sq m and the current occupants, trading as the Fire Station Cafe, began a six-year and three-month lease in March 2017 with two further rights of renewal for three years each.

The property also includes a former bowls clubrooms and this single-level building was originally constructed in the 1960s, but has since been repurposed into an office, storage, and workshop facility.

Thornhill Contracting, Fruition Horticulture, Par Communications, and The Drug Detection Agency Whakatu, Hawke’s Bay are among the office occupants at the property with lease agreements that all include further rights of renewal and future rent reviews.

There are two storage sheds measuring 30sq m and 20sq m, respectively, while a handful of industrial occupants have rolling monthly leases at the property.

Blair says on top of the steady rental stream provided by the split-risk tenancy mix, the future value of the property could be enhanced with a strategic development on the vacant land.

“Given the functionality of the site and the available space, the new owner of the property can further intensify its usage and unlock the true potential.

“With multiple entrances, the site is highly accessible for occupants and will lend itself to a wide variety of uses.”

Countdown Orewa - The ultimate passive investment

Featuring an ASX and NZX-listed tenant covenant on a new long-term lease, Countdown Orewa really is the perfect bottom drawer, passive investment.

Details on page 10

Countdown Orewa

3 Moenui Avenue, Orewa, Auckland

For Sale by Deadline Private Treaty closing Wed 2 August 2023 at 4pm (unless sold prior)

Returning $1,241,392 pa net + GST

10 Year Lease from April 2021 + ROR’s

Shoneet Chand 021 400 765

colliers.co.nz/p-nzl67024385

9,380m² Total Land Area

Matt Prentice 021 464 904

ASX & NZX Listed Tenant Covenant

Town Centre Zoned Land Extensively refurbished in 2014

For Sale by Deadline Private Treaty closing Thu 20 July 2023 at 4pm (unless sold prior)

Lettable area 5,051m² (est)

Peter Herdson

021654323

6,293m² freehold land Rental $961,032.80

colliers.co.nz/p-NZL67024347

100% NBS

Rachel Emerson 021 502 877

220+ carparks

Corner profile Cameron Road

The Ultimate Passive Investment

483 Cameron Road, Tauranga

The Warehouse, Tauranga

Strategic Commercial Asset - Prime Location

Diversified Investment With Upside

319 Neilson Street, Onehunga

For Sale by Deadline Private Treaty closing on

Wednesday, 19 July 2023 at 4pm (unless sold prior)

Boundary Lines Indicative Only

Ultimate Tradies Workshop

Unit 6, 59 Porana Road, Wairau Valley

Auction, 11am Thu, 27 July 2023 (unless sold prior)

Rental upside in the future

Split-risk with multiple options

5 individual titles on 3,525m² of land

151m² Unit + 4 Carparks Dual Roller Door Access Vacant Possession

Matt Prentice 021 464 904

Ben Cockram 021 245 5855

Matt Prentice 021 464 904 colliers.co.nz/p-nzl67024225

Unbeatable Industrial

Shoneet Chand 021 400 765

colliers.co.nz/p-nzl67024324

For Lease

Large Scale Industrial Facility

31 El Prado Drive, Kelvin Grove, Palmerston North, Manawatu / Wanganui Tender closing Wednesday 12 July 2023 at 4pm (will not be sold prior)

12 Newlands Road & 6 Hurring Place, Wellington

Blue chip tenants Net leases Buy one or buy both

Tim Julian 021 488 029

Kieran Lennon 021 137 1472

Richard Findlay 021 620 188

Hamish Templeton 029 127 0018

colliers.co.nz/p-nzl67023902

Approximate floor area of 27,358 m²

Phil Nevill 021 396 092

Seismic status of100% NBS

Potential to divide space into multiple tenancies

Doug Russell 027 222 8088

Grant Lloyd 021 433 144

colliers.co.nz/p-nzl67024325

54 Stonedon Drive, East Tāmaki, Auckland

For Sale by Deadline Private Treaty, offers closing 4pm, Wednesday, 19 July 2023 (unless sold prior)

East Tāmaki at its best

A modern first-class property with a new eight-year lease to a longstanding tenant in the prime industrial location of East Tāmaki shapes as one of the best available offerings in Auckland in this low-risk asset class.

54 Stonedon Drive, East Tāmaki has 1,666sq m of total net lettable area on a 2,980sq m freehold site and will interest buyers who understand the criteria of what makes a quality industrial building.

The property provides 60 per cent site coverage and sits on the doorstep to Highbrook Business Park and State Highway 1 on-ramps.

Waterware, the longstanding occupant, have agreed to a new eight-year lease that will begin on settlement.

The lease returns $320,000 plus GST per annum in net annual rental income and includes two further rights of renewal for four years each, providing a strong underlying tenant covenant from an occupant that has been on-site since 2005.

The building is the ultimate in functionality and includes a fully fenced yard with excellent access and provides further peace of mind for investors with a 100 per cent A-grade earthquake rating.

The property is strategically located only 350m from East Tāmaki’s central intersection on Highbrook Drive that leads to State Highway 1, which is approximately 3km away.

Colliers Directors Josh Franklin, Ben Cockram, and Paul Higgins have been exclusively appointed to market the property for sale via deadline private treaty closing at 4pm on Wednesday 19 July, unless sold prior.

Originally constructed by Euroclass for Waterware in 2005, the property comprises a warehouse that spans 1,354sq m with a stud height ranging from 7.5m rising to 9.1m at the apex.

The yard provides room for containers and truck turning, with access to the warehouse provided via two canopy protected roller doors.

The immaculately presented single-level office measures 198sq m and includes recent fit-out upgrades. The owners have also invested in a new ventilation system and solar panels for improved efficiency.

New Zealand Research Report | June 2023

What now for yields as peak in OCR is signalled

Having raised the cash rate at the most aggressive pace in its history, the Reserve Bank of New Zealand (RBNZ) recently signalled it has reached the top of the cycle. This will encourage the view that property yields have also reached their cyclical peak. Further movement, albeit limited, may be expected over the short-term.

The return of inflation ends the period of low interest rates

The GFC that began in 2008 prompted central banks in Western economies to slash interest rates as a means to bolster their struggling economies. Over the following years, economic performance gradually improved, but interest rates remained at historically low levels.

However, when the Covid-19 pandemic hit, governments and central banks around the world swiftly implemented emergency measures to support their economies. One of these measures included aggressive interest rate cuts, driving them to record lows in numerous nations.

As economies cautiously reopened, a new challenge emerged: surging inflation. This inflationary trend has been attributed to various factors, such as disruptions in global supply chains, shortages of essential workers, and a surge in consumer spending coined as ‘revenge spending’.

Consequently, central banks found themselves compelled to increase interest rates. This move aimed to curb excessive demand within the economy and work towards restoring inflation to target levels set by policymakers.

New Zealand first to start, first to finish?

The RBNZ took swift and aggressive action as New Zealand was amongst the first countries to combat rising inflation by increasing interest rates. Starting from the Covid-19 induced emergency level of 0.25%, rates were lifted in October 2021, and at each of the subsequent 11 Monetary Policy announcements.

However, the RBNZ has indicated that the current OCR rate of 5.5% will likely be the peak of this cycle, and they anticipate initiating rate cuts in the third quarter of 2024. This announcement surprised experts who expected the

recent surge in migration to fuel demand, contribute to inflation, and require further rate hikes.

NewZealand First to Start, First to Finish?

TheRBNZtookswift andaggressiveaction as NewZealand wasamongst the countriestocombat rising by increasing interest rates. Starting from theCovid-19inducedemergency levelof0.25%,rates were liftedinOctober 2021, andateachofthe subsequent 11 MonetaryPolicy announcements.

However, theRBNZ has indicatedthat thecurrent OCRrateof5.5%will likely be thepeakofthiscycle and they anticipate initiating rate cuts in thethird quarter of 2024. This announcement surprisedexperts whoexpectedthe recent surgeinmigration to fuel demand, contribute to and require furtherratehikes

In contrast, the RBNZ asserts that inflation has already peaked and will continue to ease. Although government investment is predicted to grow, the overall fiscal policy is expected to be contractionary. The RBNZ believes that demand in the economy is softening, citing a slowdown in consumer spending and an easing of residential construction activity. Furthermore, they foresee migration levels gradually returning to pre-Covid-19 trends in the coming quarters.

In contrast,the RBNZ assertsthat hasalready peaked and will continue to ease.Althoughgovernment investmentispredicted to grow,the overall policy is expected to be contractionary. The RBNZ believes that demand in theeconomy is softening, citing aslowdown in consumer spending and an easing of residential construction activity.Furthermore,theyforesee migration levels gradually returningtopre-Covid-19trendsinthe coming quarters

Property Values to Stabilise After Wild Ride

Property owners will welcomethe Reserve Bank’ssignal that the(OCR) hasreached itspeak, consideringthe impact that therapidlyrisingrates have had on capitalvalues. Over theperiod fromearly 2020tolate 2021, thevalue of assets,including commercial andindustrialproperties,surgedprimarily fueled by historically low borrowingcosts

Property values to stabilise after wild ride

Thesubsequentrapidincrease in theOCR,however, has ledtohigher costs, causingarecalibration of yields resulting in apartial reversal of thecapital gains previously generated.

Thebest illustration of themovementin yieldsisprovidedbythe Aucklandindustrialmarket, giventhe relatively high number of sales. In December 2019, average yieldsfor Auckland industrialproperties stoodat5.3%, falling by theend of 2021, to 4.1%.By March 2023, howeveraverage yields had risento5.6%. While yield movement varied across sectors and locations,the overalltrend remained consistent

Data released by MSCI revealsthe impact of this cycleonproperty values.Average annual capitalgains for all commercial and industrialproperties peaked at 14.5%inthe year endingSeptember 2021. However,overthe year to March 2023, averagecapitalvaluesdeclined by 6.3%

Property owners will welcome the Reserve Bank’s signal that the (OCR) has reached its peak, considering the significant impact that the rapidly rising rates have had on capital values. Over the period from early 2020 to late 2021, the value of assets, including commercial and industrial properties, surged primarily fueled by historically low borrowing costs.

Valuevariations across sectors also depend on rental trends,which mirrorcurrent demand dynamics.Inthis respectthe industrialpropertysector has been thestrongestperformer,withanextendedperiodoftight market conditionsresulting in rental growth over thepasttwo years. Thisgrowthhas mitigatedthe impact of rising yieldsonproperty values.

The subsequent rapid increase in the OCR, however, has led to higher financing costs, causing a recalibration of yields resulting in a partial reversal of the capital gains previously generated. 2 New Zealand Research Report

RBNZ Z OCR R Hiking g Cycles s Since e Inception

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Northland Region Colliers Essentials | 1H 2023

NORTHLAND REGION COLLIERS ESSENTIALS | 1H 2023

The demand for high-quality office accommodation in Whangārei has led to even tighter market conditions with low vacancy rates supporting the case for new development.The industrial sector has also experienced an extended period of elevated tenant demand, with leasing options becoming increasingly scarce. The demand for retail premises is mixed. While there is a significant shortage of large-format retail premises, vacancy rates within retail strip locations are trending upwards.

Thedemandfor high-quality accommodationin Whangareihas led to even tightermarketconditions. Low vacancy rates support thecasefor newdevelopment. The industrial sector hasalso experiencedanextendedperiod of elevated tenant demand,with leasingoptionsbecoming increasingly scarce.The demand forretail premises is mixed. While thereisa shortage of large-format retail premises,vacancy rates within retail striplocations aretrending upwards

Thedevelopmentsectorhas remained activedespite increases in interest rates anda cooling economy.Inthe year to March 2023, building consent issuance approved theconstruction of 41,000 sqmofnew commercial and industrial with the industrial sector accounting forapproximately 49%ofall consents issued.Major infrastructure projects will theregional economy, includingthe stage one of thenew regional hospital with abudgetof$759 million. Northport is proposing a expansion of its operation to include thedevelopmentofa modern, container terminal, covering approximately13hectares.The terminal would link directly to KiwiRail’s proposed MarsdenPoint spur

The development sector has remained active despite increases in interest rates and a cooling economy. In the year to March 2023, building consent issuance approved the construction of 41,000sq m of new commercial and industrial floorspace, with the industrial sector accounting for approximately 49 per cent of all consents issued. Major infrastructure projects will benefit the regional economy, including the confirmed stage one of the new regional hospital with a budget of $759 million. Northport is proposing a significant expansion of its operation to include the development of a modern, efficient container terminal, covering approximately 13ha. The terminal would link directly to KiwiRail’s proposed Marsden Point spur.

A shortage of industrial leasing options haspushed warehouse rental values up to an averageof$135per sqm in Q1 2023, from $130 in Q4 2022. Retail rentshave remained stablebut incentives have increased, particularly in secondary locations, wherevacancy rates have increased.Inthe sector, the to quality hasseen upward pressure applied to primegrade rentals

A shortage of industrial leasing options has pushed warehouse rental values up to an average of $135 per square metre in Q1 2023, from $130 in Q4 2022. Retail rents have remained stable but incentives have increased, particularly in secondary locations, where vacancy rates have increased. In the office sector, the flight to quality has seen upward pressure applied to prime grade rentals.

Commercial and industrial property salesactivity declined in 2022from therecord levels recorded in 2021, the impactuponinvestorsentimentof increasing interest rates andforecasts of recession. Despite this, transactions totalling $147.5 million were completedoverthe year led by theindustrial sector whichaccounted forapproximately 59% of total sales by value

Commercial and industrial property sales activity declined in 2022 from the record levels recorded in 2021, reflecting the impact upon investor sentiment of increasing interest rates and forecasts of recession. Despite this, transactions totalling $147.5 million were completed over the year led by the industrial sector which accounted for approximately 59 per cent of total sales by value.

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Colliers rebrands Corporate Solutions to Occupier Services

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Colliers has rebranded its Corporate Solutions service line in New Zealand, and it will now be known as Occupier Services.

The Occupier Services team at Colliers provides market-leading property services that optimise their client's operations for over 10,000 properties nationwide.

The team of 60-plus experts have access to state-of-the-art software for reporting and data analytics and their clients include some of the most high-profile organisations in the public and private sectors such as the Ministry of Education, Z Energy, and BNZ.

The rebranding is a strategic decision that will bring the New Zealand Occupier Services team in line with their Colliers colleagues from across their global network.

Gerard Earl, National Director of Occupier Services at Colliers, says the rebrand will allow for better alignment across Colliers.

“Our team are highly committed to providing the best possible service for our clients and we take immense pride in our track record of providing innovative outcomes for their property needs through state-of-the-art technology platforms and intricate analysis.”

Gareth Fraser, Chief Executive of Colliers New Zealand, says the new name for the service line is a better representation of their offering to the organisation’s valued clients.

“The Occupier Services team is a hugely successful part of our business that continues to experience consistent growth, while working with an expanding portfolio of prominent clients.”

Recently, the Occupier Services team secured major management agreements with Fortysouth, and the Noel Leeming Group, exemplifying the depth and breadth of their capabilities.

This document has been prepared by Colliers New Zealand for advertising and general information only. Colliers New Zealand does not guarantee, warrant or represent that the information contained in this document is correct. Jun/Jul