Commercial
ssets
Harcourts Waikato Market Commentary
Monarch Commercial Limited MREINZ Licensed Real Estate Agent (REAA 2008)
Issue 28 | March 2019
Background The Government’s Tax Working Group, chaired by Sir Michael Cullen, provided recommendations that would improve the fairness, balance and structure of the tax system over the next 10 years. Is this issue important for Property Council members? Introduction of a capital gains tax could cost the sector $100’s of millions, then billions a year. A poorly designed one will cost more when compliance costs are factored in. The report recommends a broad capital gains tax, but the key target will be land and buildings (residential property investment, commercial/ industrial and rural property). There are only a few limited recommendations that would help mitigate the effects of a capital gains tax on the commercial property industry. It is important to note the report is simply a set of recommendations to the Government. There is a difficult and lengthy (months to years) political process to go through before any changes become law. The results of that are highly uncertain given some parties in the Government are sceptical/opposed to capital gains tax. General recommendations • The Group agree that there should be an extension of the taxation of capital gains from residential rental investment properties. • Majority of the group support the introduction of a broad approach to the taxation of capital gains (i.e. onto business assets, shares etc). (Key business friendly members of the TWG opposed and issued a minority report.) • The Group does not see a case to reduce the company rate at the present time or to move away from the imputation system. • The Group does not recommend introducing a wealth tax. • The Group does not recommend introducing a land tax. • Recommended retaining the imputation system. • Recommended changes to the losscontinuity rules, expanding deductions for ‘black-hole’ expenditure and concessions for nationally significant infrastructure projects. • Subject to fiscal constraints, the Government could consider restoring depreciation deductions if capital gains taxation is extended. Key recommendations for commercial property The Group recommended: • Including gains and most losses from all
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types of land and improvements (except the family home), shares, intangible property and business assets. Only taxing gains and losses that arise after the implementation date (Valuation Day). The tax be imposed on a realisation basis in most cases. Expenditure incurred in acquiring a taxable asset will be deductible at the time of sale. Similarly, costs incurred after acquisition on making improvements to the asset will also be deductible from the sale proceeds. Capital losses be ring-fenced for: portfolio investments in listed shares (other than when they are trading stock); associated party transactions; and losses from Valuation Day assets. Capital losses on privately used land be denied entirely. Capital losses (other than those described above) be treated in the same way as other tax losses and taxpayers should generally be able to offset losses arising from the disposal of capital assets against ordinary taxable income. Consider restoring depreciation deductions for buildings if there is an extension of the taxation of capital gains, subject to fiscal constraints. To manage the fiscal costs, the Government could reinstate building depreciation on a partial basis for: > seismic strengthening only > industrial, commercial and multi-unit residential buildings. Reform the treatment of black-hole expenditure, with: a) a new rule to recognise deductions for expenditure incurred by businesses that is not otherwise dealt with under the Income Tax Act 2007, including in respect of abandoned assets and projects. b) a claw-back of tax deductions where
an abandoned asset or project is subsequently restored, such that those deductions would be capitalised. c) the spreading of black-hole expenditure over five years. • Consider tax measures that encourage building to higher environmental standards. • A range of recommendations to change the PIE regime, including specific provisions relating to “property PIEs”, at first glance these changes appear to have negative connotations). Interestingly, the minority report inserted into chapter six mentions a couple of key points; firstly, the lock-in effect. Unless there are generous roll-over relief provisions, businesses may be penalised for trading up to new/different assets. The taxation of capital gains will effectively be a stamp duty, acting as a brake on market transactions potentially preventing transactions occurring because of that tax cost with a consequential lost opportunity for growth. There could be cases of double taxation where business earnings are taxed and undistributed and shares in the business are then sold. There does not appear to be an easy solution to this. We expect the Government to ignore or amend several of these recommendations based on the political climate. We still have a lot more work to do and will need to keep on top of this issue. Source: Property Council New Zealand (abridged)
ALSO INSIDE... • Opportunities Knocking • Retail shows signs of revitalisation • Record growth leads to lowest industrial vacancy ever
Monarch Commercial Ltd (REAA 2008) • Cnr Victoria & London Streets, PO Box 900, Hamilton 3240 • Ph 07 850 5252
LOCAL EXPERTS. GLOBAL RESOURCES.
TAX WORKING GROUP RECOMMENDATIONS FOR PROPERTY
OPPORTUNITIE PRIME INDUSTRIAL INVESTMENT
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RETAIL SHOWS SIGNS OF REVITALISATION
27-29 SOMERSET STREET, FRANKTON, HAMILTON • Prime Hamilton industrial investment property • Iconic Hamilton business (Zip Plumbing Plus) returning $126,500pa plus GST & Outgoings • 1,200sqm approx. of floor area on 2,206sqm of land and 23 on-site car parks • Family Vendors require a change of direction and are offering this opportunity to the market after 24 years
Auction – 11am, Thursday 28th March 2019 (unless sold prior) Karl van Gisbergen – 021 487 521 karl.vangisbergen@naiharcourts.co.nz
Scott Sander – 027 248 5811 scott.sander@naiharcourts.co.nz
INDUSTRIAL LAND THAT WON’T BREAK THE BANK!
32 occupancies are currently under refurbishment or fitout, the most recent CBD new development activity being at 575 Victoria Street offering two tenancies of 145sqm and 90sqm after the demolition of Domaine Restaurant due to a fire. In addition, there are four tenancies currently closed for redevelopment, including ex Kathmandu at 58 Bryce Street and ex Ronnies Cafe at 335-337 Victoria Street. Three food retailers at 184-188 Victoria Street have closed to make way for the Waikato Regional Theatre that is expected to open in late 2021. The recent development of inner-city apartment buildings, along with the attraction of office occupiers back into the CBD, has seen an increase in retail leasing enquiry, which we expect to see the benefits of during 2019. Zoltan Moricz, Senior Director and Head of Research at CBRE New Zealand says the additional investment into the public realm in the Hamilton CBD in recent years, is also contributing. “Hamilton’s CBD streetscape is becoming a more attractive and pleasant environment for pedestrians, and this is benefiting retailers, particularly high-quality food and beverage.” “Small projects such as shared spaces, footpath improvements, street beautification and art have really changed the look and feel of the CBD in the past couple of years, providing a point of difference to traditional mall environments. Future links that will improve access to the riverfront will capitalise on natural amenity and draw more people into the CBD.”
AU CT I Brad Chibnall – 021 448 989 brad.chibnall@naiharcourts.co.nz
Sean Stephens – 027 478 1669 sean.stephens@naiharcourts.co.nz
ICONIC HOSPITALITY OPPORTUNITY
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28 ALEXANDRA STREET, HAMILTON CBD • Lease returning $88,000pa plus GST & Outgoings • 6 year lease term • Situated in the heart of Hamilton’s vibrant hospitality precinct • Located near proposed Waikato Regional Theatre and several significant office developments • Part of a long established Hamilton iconic business, a market leader that has been operating at this site since 1996
Auction – 11am, Thursday 28th March 2019 (unless sold prior) Aaron Donaldson – 027 755 7522 aaron.donaldson@naiharcourts.co.nz
Mike Neale – 027 451 5133 mike.neale@naiharcourts.co.nz
REALISTIC VENDOR READY TO MAKE A SALE 28 DEVINE ROAD, TAMAHERE, HAMILTON
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The change in vacant stock according to the survey is reflective of the volume of stock temporarily withdrawn for refurbishment or redevelopment. The total volume of space under refurbishment in the CBD is around 11,700sqm.
• 4,824sqm freehold industrial land, rear property off Norris Avenue • Seldom available lot of this size in the established Te Rapa industrial area • Flat contour and fully fenced • Multiple potential uses including transport depot, childcare, training facility, live and work, plus others • Close proximity to Te Rapa Road and main arterial routes
Auction – 11am, Thursday 28th March 2019 (unless sold prior)
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Total retail stock is circa 80,000sqm with prime retail space accounting for 37.3% or 29,760sqm of the total CBD retail stock, secondary stock, 28,900sqm (35%), followed by Tertiary at 22,120sqm (27.8%).
BORDERS ARE INDICATIVE ONLY
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The Hamilton CBD retail vacancy rate decreased slightly from 6.3% to 6.2% in December 2018.
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Stability in the Hamilton CBD market in 2018 has been underpinned by an increase of stock under refurbishment as landlords look to cater for demand, according to the latest retail occupancy survey (conducted by NAI Harcourts and CBRE Research).
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11C NORRIS AVENUE, TE RAPA, HAMILTON
Proposed Waikato Regional Theatre.
BORDERS ARE INDICATIVE ONLY
• 2.3562 hectares of freehold land with a Commercial Overlay • Separate 2nd title of 5,790sqm (more or less) may be purchased • Resource consented for weddings and events with seating for 200 guests • Car parking for 55 cars and 5 buses with current on and off liquor licences • Fully restored church with leadlight windows
Price: By Negotiation Mike Neale – 027 451 5133 mike.neale@naiharcourts.co.nz
Rex Hadley – 027 490 4015 rex.hadley@naiharcourts.co.nz
ES KNOCKING... FIRST TIME ON THE MARKET IN NEARLY 100 YEARS
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16-18 BOW STREET, RAGLAN
RECORD GROWTH LEADS TO LOWEST INDUSTRIAL VACANCY EVER!
• High profile site in same family ownership since 1923 • Freehold title of 1,475sqm (more or less) • Returning circa $180,000pa plus GST & Outgoings • Arguably the best commercial location in Raglan • Floor area of 620sqm (approx.) • Valuable on-site parking • Growing destination for national and international visitors
Auction – 11am, Thursday 28th March 2019 (unless sold prior) Mike Neale – 027 451 5133 mike.neale@naiharcourts.co.nz
Brad Chibnall – 021 448 989 brad.chibnall@naiharcourts.co.nz
DECEASED ESTATE SALE – INSTRUCTIONS ARE CLEAR
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27 JESMOND STREET, NGARUAWAHIA • Currently returning $30,208pa plus GST & Outgoings with an established tenant of over 20 years on a renewed lease term • Situated in a Waikato town with strong recent growth and only 15 mins from Hamilton • Seismic Assessment available (not earthquake prone) • On site car parking
Auction – 11am, Thursday 28th March 2019 (unless sold prior) Mike Neale – 027 451 5133 mike.neale@naiharcourts.co.nz
Scott Sander – 027 248 5811 scott.sander@naiharcourts.co.nz
CHARACTER INVESTMENT - COOK STREET SOCIAL
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7 COOK STREET, HAMILTON EAST • Good George Brewing trading as Cook Street Social on 8 year lease • Currently returning $78,926pa plus GST & Outgoings • Refurbished heritage building on freehold title with “A grade” seismic rating • Significant investment in fit out by Good George • Residential intensification and development planned for Hamilton East in the near future
Auction – 11am, Thursday 28th March 2019 (unless sold prior) Mike Neale – 027 451 5133 mike.neale@naiharcourts.co.nz
Lynn Lee – 021 083 25007 lynn.lee@naiharcourts.co.nz
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SUBSTANTIAL WAREHOUSE ON HAMILTON’S CBD FRINGE 9 NORTON ROAD, FRANKTON, HAMILTON • Freehold title with a land area of 3,978sqm (more or less) • Consented retail showroom/warehouse of over 2,000sqm • Asphalt yard for devanning containers, parking or storage • Main arterial routes running to the four points of the compass close by • Suitable for trade supply/distrubution centre etc
Sale Price: By Negotiation | Lease Price $200,000pa plus GST & Outgoings Scott Sander – 027 248 5811 scott.sander@naiharcourts.co.nz
Karl van Gisbergen– 021 487 521 karl.vangisbergen@naiharcourts.co.nz
New Zealand Trucks new building at Te Rapa Gateway. By Theo de Leeuw, NAI Harcourts Industrial Sales & Leasing Industrial vacancy falls to a new historical low according to the recently completed vacancy survey says NAI Harcourts agent, Theo de Leeuw. Results show demand for Industrial space remained very strong through 2018 with vacancy falling to 1.2% in Hamilton. This is despite completion of approximately 39,000sqm of new industrial space through 2018. New buildings include eight completed at Te Rapa Gateway for Origin Glass, Metalcraft Roofing, NZ Trucks, Hansa Products, TopMaq, Fosters Construction, All Fast, Curle Electrical and Better Industrial. Others completed in 2018 include ETCO/ Richmond Barr Electrical and Green’s Tapware on The Boulevard, Classic Builders unit development on Kahu Crescent also the Unit development at Maui Street. Additionally, Frankton also saw new builds being completed. These were a four unit complex in Duke Street, plus the major facility for WDHB Onelink at 59 Gallagher Drive. Other Frankton new builds include new unit or warehouse developments in Killarney Road, Colombo Street and Ellis Street. Pressure for industrial floor space has seen industrial rentals lift. Over the last twelve months annual rentals for new build industrial warehouse have increased up to $125/sqm, associated offices/amenities up to $220/sqm. Lift in rentals has resulted from increasing land cost and construction costs in addition to increased Hamilton City Council Development Levies. Rentals for secondary industrial space have been under pressure as well. As tenants have relocated to the new builds, back filling of secondary industrial space has been aggressive with nearly all stock options seeing rental increases. Rentals in secondary buildings are between $90/sqm and $105/sqm with associated office $130/sqm to $185/sqm dependent on the standard. Growth in Hamilton’s Industrial building market has been supported by increasing interest in the regions outside Hamilton. Regional Industrial market growth has been driven by improved transport linkages and Expressway’s, Councils providing a competitive environment for development and employment and general lifestyle decisions for people wanting to vacate cities such as Auckland. Regional Industrial vacancy is under pressure with very low vacancy evident at Hamilton Airport, Cambridge, Te Awamutu and other surrounding towns. We expect pressure on Industrial vacancy to continue through 2019 particularly as business confidence in the region remains strong.
Issue 28 | March 2019
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700 Te Rapa Road, Te Rapa, Hamilton
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1st November 2018 – 28th February 2019
30 Alexandra Street, Hamilton CBD
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66-68 Avalon Drive, Avalon, Hamilton
60 Church Road, Te Rapa, Hamilton
34 Percival Road, Ruakura, Hamilton
17 Sunshine Avenue, Te Rapa, Hamilton
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787-789 Victoria Street, Hamilton CBD
Shop 3, 19 Worley Place, Hamilton CBD
BETTER REGIONAL ASSISTANCE FOR EARTHQUAKE-PRONE HERITAGE BUILDINGS Owners of heritage buildings in regional areas are set to benefit from changes to Heritage EQUIP, the national earthquake upgrade incentive programme, Associate Minister for Arts, Culture and Heritage Grant Robertson announced in mid February 2019. “Heritage buildings are integral to the character of regional New Zealand, but the cost of strengthening can be prohibitive for owners in these areas,” Grant Robertson said. “These owners are now eligible for new Professional Advice Grants, which are designed to assist people at the beginning of the earthquake upgrade process. The grants provide up to 50 per cent of the costs required for obtaining services such as detailed seismic assessments, conservation reports, architectural and structural engineering plans.
7 Quail Place, Frankton, Hamilton
Other Sales • • • • • •
4 Woodward Street, Frankton Lot 7, 132 Ossie James Drive, Rukuhia 204 Sloane Street, Te Awamutu 17 Innovation Way, Horotiu 58 Great South Road, Ngaruawahia 35 Waterloo Street, Frankton
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16 Gilchrist Street, Avalon 803-807 Victoria Street, Hamilton CBD 221B Collingwood Street, Hamilton CBD 4 Sloper Avenue, Frankton 140 London Street, Hamilton CBD 32B Alexandra Street, Hamilton CBD
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Unit 8, 43 The Boulevard, Te Rapa 138 Ellis Street, Frankton Suite 25, 7 Worley Place, Hamilton CBD 697B Wairere Drive, Hamilton 64 Bryce Street, Hamilton CBD Ground Floor North, Tristram Street, Hamilton CBD 1 Edgar Street, Frankton Tenancy A4, 5 Fifth Avenue, Five Cross Roads 12 Matos Segedin Drive, Cambridge Tenancy 2, 1st Floor, 475 Grey Street, Hamilton East 164B Commerce Street, Frankton 109A Ward Street, Hamilton CBD Unit 2, 28 Mahana Road Shop 3, 19 Worley Place, Hamilton CBD 33-37 Colombo Street, Frankton 1A Green Street, Frankton
Other Leases • • • • • • • • • • • • • • • • •
Rear Unit 3, 164 London Street, Hamilton CBD Unit B, 12-14 Pukete Road, Te Rapa Unit 23, 20 Clyde Street, Hamilton East Unit 1, 220 Tristram St, Hamilton CBD Unit 6, 48 Tawn Place, Te Rapa 33 Hall Street, Frankton Shop 6, 113 Alexandra Street, Hamilton CBD 17B Somerset Street, Frankton Part of 97 Colombo Street, Frankton 12B Empire Street, Frankton Level 3, 71 London Street, Hamilton CBD Level 1, 10 Garden Place, Hamilton CBD 94J Duke Street, Frankton Part 1st Floor, 68 Bryce Street, Hamilton CBD Unit 3, 143 Maui Street, Te Rapa 609 Te Rapa Road, Te Rapa Shop 1, 77 Ellicott Road, Hamilton
OUR TEAM Kara Gerrand Mike Neale Brad Martin Karl van Gisbergen Scott Sander Theo de Leeuw Sean Stephens Aaron Donaldson Brad Chibnall Lynn Lee Rex Hadley Greg Wills
CBD & Fringe CBD CBD & Fringe CBD CBD & Fringe CBD Frankton Frankton Te Rapa North Te Rapa East Te Rapa West Suburban East Suburban West Special Projects Commercial Property Management
021 527 211 027 451 5133 027 889 3018 021 487 521 027 248 5811 027 490 3248 027 478 1669 027 755 7522 021 448 989 021 0832 5007 027 490 4015 021 896 585
610 Victoria Street, Hamilton CBD. “Many regional building owners are also able to apply for up to 67 percent of upgrade works costs. “I encourage building advisors, councils, civic and heritage trusts and other qualified entities to work on behalf of groups of building owners in regional locations. “Manatū Taonga Ministry for Culture and Heritage, which administers the Heritage EQUIP fund, is also in the process of establishing a pilot partnership programme with selected local authorities, to address local issues and identify seismic strengthening pathways. “Government is keen to ensure more building owners access Heritage EQUIP funding” Grant Robertson said. Applications for Heritage EQUIP funding are received three times per year, with upcoming rounds closing on 22 March and 29 July 2019. Detailed information about the new incentives, along with advice for building owners planning seismic strengthening projects, is available at www. heritageequip.govt.nz Source: Property Council New Zealand
IT’S NOT WHERE YOU ARE, IT’S WHERE YOU’RE GROWING.
few of our recent successes
Monarch Commercial Limited MREINZ Licensed Real Estate Agent (REAA 2008)