As 2016 draws to a close and we wind up an extremely busy 12 months, we are left wondering (again) where the year has gone.
2016 will of course be remembered for the devastating earthquake which has dealt a major blow to towns and rural communities in the South Island, as well as Wellington’s CBD, just six years after the first Christchurch earthquake.
It has also been a year of surprises with Brexit, Trump’s election, John Key’s resignation and the Irish beating the All Blacks thrown in for good measure.
We hope you enjoy reading our final newsletter for 2016 – please get in touch if you have any questions or comments. We would like to wish all our contacts a restorative summer break and a successful year in 2017.
Comments from Ron Mackersy
The commercial property market has continued to strengthen over the course of this year and researchers agree that this expansion is likely to continue over the medium term at least. In this high-demand, low-supply environment, cap rates on top quality properties are now at a premium – near or under 6% in many locations.
With interest rates and margins firming, initial returns around the 6% mark will become the norm. While this is lower than the levels investors have become accustomed to in recent years, it is worth noting that it still represents a solid premium over bank rates.
The keys to achieving strong returns when starting with low yields are long lease terms and built in rental growth. When looking at new investment opportunities, we are encouraging investors to consider where returns are likely to be in three to five years’ time as a result of income growth.
We are looking forward to bringing two significant offerings to the market in the near future: the Hoyts entertainment centre being constructed on a site bordered by Colombo, Tuam and Lichfield Streets in Christchurch CBD; and Steel & Tube’s new facility being built at Glassworks Industry Park in Hornby, Christchurch. Both will have long initial lease terms and rental growth which are essential in the current market environment.
News from Dale Robertson’s desk
One of my key areas of focus recently has been the safety of tenants in our management portfolio in Wellington following the 7.8 magnitude earthquake. My team and I have spent time with tenants inspecting properties and we were pleased to note that the buildings we manage do not appear to have suffered any damage. We are continuing to work with tenants to monitor any issues that may arise following the earthquake.
Here in Christchurch the central city rebuild is gathering pace. Shops are open in the new ANZ Centre and BNZ Centre fronting Cashel St and there is a real buzz in the area in the lead up to Christmas, as well as the announcement of a new central-city farmers market and food precinct (pictured).
The Innovation Precinct is also developing quickly around the new Vodafone and Kathmandu buildings (managed by MHP). More details on the Innovation Precinct are elsewhere in this newsletter.
In October we were pleased to welcome Harvey Norman to its new premises in the former Mitre 10 building which MHP manages at Remarkables Park, Queenstown. A full update on the new store, which has been trading well since opening, is later in this newsletter. We also look forward to welcoming French bakery Ma Boulangerie to the renovated building this month. The French couple running the bakery were profiled in the Mountain Scene recently: read the “France comes to Frankton” article here.
Elsewhere in the South Island we are bedding in several new additions to our management portfolio including:
- Progressive Engineering’s warehouse in Invercargill
- Asmuss Steel’s facility at Izone in Rolleston
- Concision Panelised Technology’s warehouse (also at Izone)
- the Southern Hospitality showroom just off Manchester St in central Christchurch.
Changes to Civil Defence Amendment Act
Parliament has passed a 2016 Amendment Bill to the Civil Defence Emergency Management Amendment Act. The bill includes new powers to require building owners to undertake damage assessments of buildings in a civil defence event, and to share information with certain parties including local councils and owners & tenants of neighbouring buildings. The bill is available to view here.
MHP would like to reassure shareholders that we have procedures already in place that will be implemented in the event of a Civil Defence emergency. This includes routine building inspections following earthquakes. We also have considerable experience to draw on following the Christchurch earthquakes, to help ensure the safety of our tenants, neighbours and the public should an emergency occur.
MHP Capability Statement
MHP has produced a Capability Statement outlining our key metrics, management services, expertise and a selection of properties under management. An electronic version is available to download below in PDF format, or if you would like a printed copy please email Anita Brosnan: firstname.lastname@example.org.
Harvey Norman opens in Remarkables Park Town Centre, Queenstown
Building work on the former Mitre 10 premises at Remarkables Park is now complete, with Harvey Norman Computer & Electrical open and trading well in their new store.
The store, which opened on October 17, will feature a commercial kitchen display area showcasing high-end commercial appliances available to commercial customers and developers of hotels, apartments, rest home businesses and the like. We understand this commercial kitchen display is one of only three in New Zealand.
In addition to the Harvey Norman tenancy, three additional smaller tenancies were developed within the former Mitre 10 premises. One of the tenancies has been leased to Ma Boulangerie (French bakery) and they are currently undertaking their fit out work. The bakery anticipates trading prior to Christmas. A lease deal is being finalised for Harvey Norman to occupy a further unit for storage, and Colliers International is currently sourcing a tenant for the third unit.
Harvey Norman’s new Queenstown store at Remarkables Park
Colliers International’s top 10 predictions for 2017
Colliers International has released its top 10 market predictions for 2017. In the report, Colliers researchers look at what will be the major trends and moves across the property sector for next year.
Christchurch Innovation Precinct continues to take shape
The first public outdoor gathering spaces in the Innovation Precinct were completed in October 2016. The area is located directly outside the new Vodafone and Kathmandu buildings (managed by MHP). They are planned to cater for public events such as markets, food stalls and outdoor dining.
The new development behind the restored McKenzie and Willis building facade on High St, opposite the Vodafone building, is also proving popular with tenants. Josh Emmett’s Madam Woo restaurant will open on the ground floor and Telstra is in discussions to take part of the office space vacated by Wynyard.
New Innovation Precinct square, Vodafone building and restored McKenzie & Willis facade
Proposed University of Waikato campus to boost Tauranga CBD
By 2020, the Bay of Plenty will have a new, University-led tertiary campus in the heart of Tauranga city. The site of the proposed development is opposite the new TrustPower headquarters on Durham St, Tauranga – which is part of MHP’s management portfolio. The development is expected to provide a boost to Tauranga’s CBD, which is facing ongoing competition and challenges from several convenience retail centres and malls in and around Tauranga.
An artist’s impression of how the new Tauranga CBD university campus will look
MHP website and LinkedIn page
Throughout 2016 we have boosted our digital presence through our new website and LinkedIn page. We are using both these channels to share the latest updates about MHP, news about tenants in our management portfolio and other relevant links. We’d like to encourage you to follow us on LinkedIn and feel free to comment on the posts and discussions.
Team member profile
Emily joined MHP in January 2016. Prior to joining the team she spent six years working for Stride Property Limited in a support role to the Centre Manager at Remarkables Park Town Centre in Queenstown.
Emily’s primary role with MHP is acting as Property and Facilities Manager for Terrace Junction, one of the key properties within MHP’s Queenstown portfolio.