Southern Lakes/Central Otago Commercial Property Update - July 2021

Queenstown CBD

Queenstown’s commercial property investment sector is continuing to see demand outstripping supply as a very limited number of quality listings are brought to the market. The few opportunities that are getting to the market are receiving unsurpassed enquiry levels, evidenced recently by a CBD property marketed by Colliers commercial Queenstown team attracting 100+ enquiries and selling in the first week of the campaign. The stock shortage is continuing to compress prime yields, helped as low-interest rates support the strong buying environment. Clearly investors are still showing their confidence in the medium to long-term future of the Southern-Lakes commercial property market.

Yields in the Queenstown CBD have hit new lows, now sitting in the 3.0 - 3.5% range; upwards of 50 basis points lower than the pre-Covid environment but showing no sign of deterring interested parties.

We need to acknowledge that Queenstown CBD trading conditions have come through a very difficult 12 months. However, recent upticks in visitor numbers have increased optimism in the hospitality, retail and tourism sectors, with occupiers signalling ongoing confidence in long-term growth prospects. Established retail brands from Australia and NZ are still expressing interest in Queenstown with a couple of recent leasing transactions through Colliers at or above pre-Covid levels.

In addition, a number of town-centre commercial development projects have commenced, bringing with them their share of traffic management challenges, but also a sense of positivity for the Queenstown CBD’s future.

These projects include:

• The upper Brecon Street retail, activity and hospitality precinct
• The Skyline Gondola redevelopment project
• The Council-owned Lakeview Project for which infrastructure works have begun
• The arterial town centre bypass project, alongside Council’s $55 million project to enhance the streetscape of core pedestrian areas into more attractive, functional and user-friendly walkways through the CBD
• A number of other hotel and activity developments either planned or underway.

Frankton Flats

The Frankton Flats area has a similar theme with a distinct shortage of industrial land in particular available, again driving the imbalance in supply and demand.

Prime yields for Frankton have also compressed from pre-Covid with recent transactions at 4% - 4.5% for Trade and Logistics.

Retail trade in the local-led Frankton area is reported to be ahead of pre-Covid levels, particularly in the home, lifestyle and DIY sectors. Retailers are reporting increased performance in all three retail parks – Remarkables Park Town Centre, Five Mile and Queenstown Central.

Cromwell

The shortage of industrial land in Queenstown is proving beneficial to the Cromwell market; land sale activity in the area is high, with its position as a transport distribution and logistics hub helped by the increased versatility of the land, attracting interest from a diverse range of businesses.

High profile industrial land opportunities are showing sale rates of up to $500 per sqm. Next month sees the release of a new Central Otago District Council-led subdivision, Cromwell Industrial Estate, a staged development of industrial land priced from $400-$500 per sqm.

Contact Marie Hendren for early notice of the first release of these sites.

Wānaka

Similar to Queenstown and Cromwell, Wānaka is experiencing a lack of available industrial land and a distinct shortage of quality commercial tenanted investment opportunities. Colliers will shortly be bringing to the market one of the last remaining vacant land parcels fronting sought-after Ballantyne Road which will provide a good benchmark on where values are. Get in touch with Rory O'Donnell to learn more.

Wānaka has also benefited from its strong domestic visitor base to help it stabilise through the Covid challenges of the last 12 months in particular.

Property in the Southern Lakes and Central Otago Districts has continued to outperform almost all other centres in New Zealand – to discuss this in more detail, please get in touch with one of the team.