New Plymouth riding regional New Zealand’s success

New Plymouth with Mt Taranaki in back ©Sky View Photography

New Zealand’s commercial property market is experiencing a prolonged period of growth with many of the regional centres reaping the rewards. The city of New Plymouth, perched on the west coast of the North Island, has benefited from a recent influx of investor capital and a surge in development.

In March 2018, when Colliers established the New Plymouth office, the commercial property landscape was very different. Industrial land values were sitting at $70 to $90/sqm while around 15% of the primary industrial precinct sat undeveloped and unwanted by developers and owner occupiers.

Yields being achieved for prime assets averaged approximately 7.5% and the majority of investor demand was from retiring farmers.

Fast forward to post-COVID 2020/2021 and things have changed dramatically. Land has been absorbed to a point where there are few options left. Prime yields have compressed to a new benchmark of 5.5%, with strong demand coming from aggressive non-local investors chasing the comparatively higher returns than they obtain in the main centres.

New Plymouth appeals to investors because of the underlying strengths of the region. The economy is underpinned by agriculture, construction, the petrochemical industry and manufacturing, with the latter being the region’s largest employer. In terms of productivity, Taranaki’s GDP per employee measures $157,000 which is 34% higher than the New Zealand average and one of the top performing regions in the country.

The wider Taranaki economy is performing extremely well, bolstered by a residential and infrastructural construction boom.

Net migration is increasing, reflected in the number of residential building consents which are up 30% on last year.

Several multi-million dollar developments are planned to start in 2021, including the redevelopment of the Taranaki Base Hospital. The Government has committed $300 million to undertake this significant project.

At the time of writing, there are 19 industrial development projects consented for or under construction in New Plymouth’s primary industrial precinct of Bell Block, which covers an area of 260ha. The majority of development is being undertaken by owner occupiers though there is an increasing appetite driven from speculative builders.

Colliers has brokered some of the region’s key sites. Properties of note include the $13 million The Warehouse in the CBD, and property at the Valley Mega Centre, the region’s largest retail park. In December 2016, Colliers sold the 7.4ha ex-Ravensdown Fertiliser site at the northern entrance to the city. The prominent site was sold to developers, who plan to construct a multi-unit retail park, an upgrade that will be great for the city, creating jobs and going someway to retaining local consumer spending.

In the last six weeks of 2020, Colliers brokered seven sales with a combined value of $14 million showing how buoyant the market is. This included the two largest industrial sales of the year. A 2ha property leased to a multinational petrochemical company sold in an off-market sale to an Auckland investor. The other, a vacant industrial facility with a site area of 1.3ha, was sold to a local steel fabricator. Both sales represented market yields in the mid 5%, reflecting purchasers’ increased appetite to invest in industrial stock, and the growing confidence in the region.

There is increasing enquiry from national bulk retailers for large format stores. In December 2020, more than 2,000sqm was leased to Australasian retailers who had identified New Plymouth as a growing consumer base.

Looking forward, we would anticipate that 2021 will see a similar level of investor demand. There are several A-grade investments coming to the market which will see new benchmarks being set on prices. Of the four campaigns run at the beginning of 2021, each received multiple offers and fierce competition among local and non-local investors.

Benet Carroll, Director Colliers New Plymouth

With the opening of Colliers’ New Plymouth office and subsequent new offices in Katikati and Cromwell, the company now has 23 offices nationwide. Colliers is a leader in property services including commercial and industrial sales and leasing, real estate management, valuation, and rural and agribusiness advisory and sales. Benet Carroll studied a Bachelor of Business Studies, majoring in Property Valuation and Management before working as a property valuer and then industrial sales and leasing broker in the Colliers Wellington office.