Hawke’s Bay’s Strong Fundamentals Driving Growth

The latest Hawke’s Bay
commercial and industrial insights and data report from
leading agency Bayleys shows sustained demand for quality
assets, yields remaining stable, upwards pressure on rents
in the industrial arena, and renewed optimism with
international tourism returning to the region.

Bayleys
Hawke’s Bay’s commercial manager Kerry Geange said
Bayleys’ data supports the heightened activity being seen
in the commercial and industrial market, with increased
enquiry and investment from outside the region evidence that
its sought-after fundamentals carry
weight.

“Hawke’s Bay property has traditionally
been tightly-held by intergenerational owners and there is a
shortage of stock coming to the market as owners opt to hold
and watch as the post-COVID economy unfolds,” he
said.

“When property does come to
the market, we’re noting solid interest from local
investors and owner-occupiers, along with a clear uptick in
enquiry and transactions from North Island buyers with
strong representation from the Manawatu, Waikato, Wellington
and Auckland.

“Well-located, high specification
property with good tenant covenants sells very well and
quickly, and there’s currently a lot of capital in the
market looking for opportunity in the commercial and
industrial space.”

Benchmark yields for modern
commercial and industrial property sit in the 4.9-5.7
percent range.

Leasing-wise, Geange said in-line with
the rest of the country, Hawke’s Bay is witnessing a
flight-to-quality for office assets, led largely by national
tenant occupiers.

“Benchmark net face rents for
modern city centre offices are in the $330-$360 per square
metre range per annum and we’d expect rises in rents for
new-build office developments given escalating construction
costs.

“Councils in both Napier and Hastings are
driving transformative change in the CBD areas with improved
streetscapes, amenities and community facilities which adds
another layer of appeal for investors, owner-occupiers and
tenants.”

The strength of the regional economy,
which continues to be underpinned by the primary sector, is
giving investors the confidence to commit to Hawke’s Bay
according to Geange.

“While the horticulture sector
has had some real challenges around workforce and supply
chain over the past couple of pandemic-related years, it
remains a core part of the region’s economic
well-being.

“We understand there has been a doubling
of land planted in apples in the last four years, with new
planting regimes effectively and significantly increasing
production which in turn is flowing on into the coolstore
and packing shed parts of the property mix with new
development in the Twyford, Fernhill and Whatatu
areas.

“Napier City and Hastings District Councils
are looking at the next phase of potential development
expansion land with careful consideration given the
protections around the highly-productive Heretaunga Plains
‘fruit bowl’ and the changing face of some traditional
industrial precincts.”

Industrial occupiers are now
gravitating more towards Awatoto, Irongate, and Omahu Road,
while Hawke’s Bay Airport is proposing an industrial
business park development on airport land.

The
gentrification of the formerly industrial Ahuriri area
continues with a greater presence of office occupiers
interspersed within a vibrant hospitality
precinct.

Council is working on its broader inner
harbour revitalisation plan for that area, and Mackersey
Development Limited’s new West Quay project will feature
restaurants, bars and retail at street level with serviced
apartments and luxury apartment living above.

Geange
said population growth in the Bay is providing stimulus to
construction and retail sectors, and the aged care and
retirement living sector is flourishing on the back of the
region’s demographics.

“There’s also a move to
more intensified residential development around core city
infrastructure, and we’re seeing some conversion of inner
city office blocks to residential accommodation in Napier
and Hastings.

“The region hit a population over
160,000 in the last couple of years, and 200,000 is looking
likely in the not too distant future.

“That starts
to be a critical mass of population which will feed the
service and construction industries, and support the service
sector.

“I see exciting times ahead for Hawke’s
Bay with new projects like the master-planned 207ha Mission
Hills greenfield development on Napier’s western urban
boundary with its mix of residential homes, upmarket
lifestyle block residences, commercial and community hub,
reserve areas and walking/cycling networks bringing new
opportunity to the area.

“There’s new office
development planned for Havelock North which will change up
the dynamics of the Village which has seen some progressive
new commercial development in recent years.”

The
region’s tourism sector – driven by Napier’s art deco
fundamentals, Hawke’s Bay’s wine producing pedigree, and
an active cruise ship market – took a hit due to border
closures, but Geange said there are promising signs that
this element of the region’s economy will rebound
quickly.

“There are currently about 90 cruises
tentatively booked to visit Napier Port during the upcoming
cruise season from October to April, with a new $175 million
wharf set to improve the port’s accessibility and
capacity.

“Retailers and hospitality operators are
hanging out for the return of tourists and some sense of
normality around event management, despite strong domestic
support for the
area.”

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