THE PRESS - Canterbury’s commercial property market remains buoyant despite a slowing economy and softening residential sector.Dairy farmers with money to invest are insulating the province’s commercial-property sector from any downturn, says Colliers International Christchurch managing director Hamish Doig. Many farmers wanting to spread their risk had been encouraged to make off-farm investments in commercial property because of the attractive seven per cent return. The Christchurch market also tends to be more reliable and tenant loyalty is often stronger than in other places, Doig says. “Of course, there are going to be some issues over the next year or two, but I think that fundamentally the Christchurch commercial property market is in sound shape.” However, two distinct markets are emerging in the sector and developments relying on finance companies, which depend heavily on the sub-prime market for funds, could be at risk, he says. “We’re all well aware of the flight of funds away from finance companies, which naturally puts pressure on those who have borrowed from them.” He is aware of several Christchurch developments which need to secure a much higher percentage of pre-sales or leases to go ahead. Developers needed sufficient equity to refinance with main trading banks, which were more cautious than finance companies. Private equity funds are also being called on for backing, Doig says. High-quality prime properties with good tenants remain heavily sought after by institutions such as ING Property Trust Management, which spent $24 million on two industrial properties in eastern Christchurch recently. Similar funds are looking to secure good tenants with long-term leases, but these are hard to source, Doig says.

Layne Harwood, Simes chief executive, also believes there is continuing strong interest for commercial property and to prove that his company has released an Easter portfolio of 40 commercial properties for sale. “There is a huge appetite for all sorts of commercial property,” Harwood says. The portfolio is worth mare than $100m and includes a range of properties for sale or lease in Christchurch and Canterbury from small commercial properties to investment opportunities and development sites. “There is continuing strong interest through all property types. Investors, owner-occupiers, developers and landowners are looking for opportunities.” One property in the portfolio is Grasmere Station, a 625ha-property, 125 kilometres from Christchurch, near Arthur’s Pass, with a price tag in excess of $12m. The station is home to a boutique luxury lodge and also runs sheep. The lodge is the main focus of the property, with the farm being run as a large lifestyle block, but there is an opportunity for someone to come in and develop the farm, Harwood says. The land is flat and would be suited to dairy, if water could be provided. The owner, an Auckland investor group, is looking to move on to other ventures. Harwood expects the property to attract hotel operators across the Asia-Pacific region.

A 1.5km block of commercial-zoned land in St Asaph Street is also up for sale for more than $12m. “It’s very uncommon to have a block this size for sale so close to the (central) city.” Harwood says the property is suited to redevelopment but also has an annual income from existing buildings and tenants of more than $900,000. Tenants included a variety of vehicle-related service companies including a vehicle-testing station. Existing owner Hazeldean Business Park Ltd is selling after owning the property for a year. Harwood expects the commercial-property market to be strong into the future because it provides good ongoing returns.