A deep dive into regional commercial property market movements

Exploring regional commercial property markets

Bay of Plenty Commercial Real Estate

Despite a challenging market, Tauriko Business Estate continues to see robust tenant interest, particularly in larger premises ranging from 250m2 to 500m2. This trend is bolstered by significant construction activity, reflecting confidence in the estate's growth. Developers and landlords report healthy enquiry levels and quick occupancy of vacant spaces, attracting a notable influx of businesses from outside regions drawn by prospects of a market recovery.

However, while larger business spaces thrive, smaller 'trade type' businesses have declined, yet the adaptability of landlords remains crucial in tenant retention and attraction. Sales activity for land and buildings has moderated, primarily driven by owner-occupiers, with investors showing limited interest. Yields in Tauriko are adjusting to between 5% and 6%.

In contrast, the CBD's retail leasing struggles to reach pre-COVID levels, with many businesses persisting through landlord concessions. Nonetheless, the broader Bay of Plenty region shows economic resilience, highlighted by record-breaking kiwifruit production and robust activity at the Port of Tauranga, promising a positive impact across local sectors.

Kapiti-Horowhenua Commercial Real Estate

Sales and leasing activity in the Kapiti region are on the rise, marked by notable listings and transactions such as the Countdown supermarket in Waikanae, St Joseph's Skin Clinic, and trade-retail stores on Kapiti Road in Paraparaumu. Commercial developers are actively acquiring properties in regional CBDs to transform into mixed-use premises, demonstrated by LPM Holdings Ltd's recent purchase of retail properties in Waikanae township, signalling confidence in future growth and demand for such developments.

In Levin, the Horowhenua District Council is advancing its Town Centre Strategy by acquiring earthquake-prone retail properties on Oxford Street. This move aims to enhance pedestrian connectivity and diversify commercial, residential, and social spaces, presenting robust investment prospects.

While the industrial warehousing and workshop market in Kapiti and Horowhenua shows resilience, with strong demand driven by roading improvements and population growth, retail leasing remains subdued with persistent vacancies and stagnant rental rates. However, with commercial lending rates at 9-10% p.a., cash-rich investors can secure valuable deals that promise added value and improved cash flow.

Whanganui Commercial Real Estate

Despite market challenges, Whanganui's central city retailers demonstrate resilience, maintaining a robust presence in the CBD as they await an economic upturn. Flexible landlords are successfully retaining tenants by adapting rents, terms, and conditions, while those filling spaces recognize the need to align with market demands.

In sectors like trades, construction, and industry—both light and heavy—businesses are holding steady. Despite fewer forward orders, ongoing and planned projects continue to advance. Recent processing of a significant number of industrial consents is set to enhance activity in Whanganui’s industrial estates, including central locations and city fringes. Additionally, the rise in smaller industrial units for lease reflects a trend of businesses relocating.

Property Brokers is poised to introduce new investment opportunities, featuring a new residential subdivision and several central city retail buildings. Similarly to other regions, our industrial sector remains robust. Developers are preparing for a future market revival, spurred by lower interest rates and a resurgence of confidence, anticipating renewed dynamism in the market.

Hawke's Bay Commercial Real Estate

Hawke's Bay businesses and developers are grappling with the aftermath of Cyclone Gabrielle amidst a challenging economic environment, leading to diminished business and consumer confidence. As a result, many in the commercial sector have adopted a cautious wait-and-see approach, resulting in fewer transactions than previously observed.

Sector-specific trends have emerged in Hawke's Bay, with office and retail spaces experiencing weak demand, contrasting with the robust interest in the industrial sector. Although industrial property rents have surged due to a shortage of new developments, it is anticipated that supply and demand will stabilize over time.

The region's primary industries, crucial to the food and wine sectors, continue to thrive, buoyed by the resurgence of local and international tourism.

Local economists are optimistic about the future, believing that forthcoming government policies, potential reductions in interest rates, and a decrease in inflation will alleviate the risk of capital loss and restore confidence across all market sectors.

Horowhenua Commercial Real Estate

Horowhenua, with a population of around 36,000, is poised for significant growth over the next two decades, expecting a 71% increase to 62,000. Levin, the main centre, is strategically located at the junction of State Highways 1 and 57.

The newly launched 400-hectare Taraika housing and business estate is not just about homes. It's a job creator, set to bring 2,500 homes and generate 280 full-time jobs—170 in construction, 80 in professional services, and 30 in support industries.

Several prominent businesses, such as Thermosash, Mainfreight, Oji Fibre Solutions, Lattey Group, Fletcher Reinforcing, Carters Timber, Komatsu, and L.T. McGuinness, have already moved to Horowhenua. With high demand for large industrial sites, more businesses are expected to secure spots in the new Taraika Business Park.

The upcoming four-lane Otaki to North of Levin Expressway, starting in 2025, will provide access to over 760,000 people within an hour’s drive of Levin. This development is set to transform Levin from a quiet town into a major transport and logistics hub in the lower North Island.

Manawatu Commercial Real Estate

Manawatū is on a growth trajectory, with over $8 billion allocated for transport and infrastructure improvements in the next seven years. Key sectors such as distribution, logistics, education, defence, agrifood, agritech, health, and manufacturing support the region's economy.

Te Utanganui, a multi-modal distribution hub in Palmerston North, is central to this growth. Integrating rail, road, air, and sea connections, it will make Manawatū a major distribution and transport hub for central New Zealand.

Significant projects include the North East Industrial Zone, Ruapehu Aeropark, Kawakawa Industrial Precinct in Feilding, Palmerston North Airport upgrades, the Palmerston North Integrated Transport Initiative – Regional Freight Ring Road, and the Manawatū Inland Port.

These initiatives highlight Manawatū's strategic geographic advantages, ensuring sustained economic growth and development.

Lance Judson