The impact of infrastructure on commercial real estate


The impact of infrastructure on commercial real estate

Infrastructure is essential to the efficient operation of our cities and impacts on how we live, work and play. It can also offer a significant opportunity for those looking to invest in commercial property or businesses.

iStock-638878600

When people are not able to commute quickly from the suburbs into city centres, even the most dynamic labour markets begin to stagnate. Faster commutes mean less time in traffic and potentially more time engaged in productive work or spending those hard earned dollars on goods and services.

Congested roads don’t just frustrate commuters, they slow down the flow of  goods and raw materials which ultimately  limit the country’s potential for future economic growth.

According to government data, New Zealand has over 4,000 kilometres of freight and passenger rail corridors and spends billions on upgrading and maintaining existing assets, as well as building new transport infrastructure.

These projects are of great significance when it comes to forecasting New Zealand’s future commercial property hotspots, as new public transport, roads and rail lines have the potential to transform and revitalise entire areas.

Predicting the hotspots

City transportation projects tend to signal where the next property hotspot will be. Historically this has been road or rail projects but there is increasing evidence to show that investment in public transport represents a higher value investment. There’s growing consensus worldwide that high quality, high capacity and affordable public transport is the only way for increasingly congested cities to accommodate sustained and sustainable economic growth.

But there isn’t necessarily a direct correlation between infrastructure investment and adjacent real estate investment. The increase in value from a transportation project in terms of improving access to business districts, opening new markets and reducing commute times can be negatively impacted by the diminished quality of open spaces, an adverse aesthetic or reduced safety conditions. There may also be a requirement for the government to re-zone in order for property investors to capitalise on the opportunities presented.

Upgrading ports or airports are considered a significant gain for the logistics industry but may affect neighbouring retail or residential areas by creating additional noise, pollution or construction traffic. In Auckland, the cost versus the benefits of moving Ports of Auckland away from its prime waterfront location has been debated for years, but if Northport was considered a viable alternative, commercial property around Marsden Point would rapidly increase in value.

The biggest challenge for real estate investors looking to benefit from infrastructure is timing. Often there is substantial period between announcement and completion, or even the start of construction. Major infrastructure projects inevitably get delayed due to availability of funding, resource consent, public consultations or changes in governments. This can have a significant effect on the real estate around it.

A high profile example is the City Rail Link development in Auckland. Due for completion in 2024, the City Rail Link is New Zealand’s largest ever infrastructure project. It includes a redeveloped Mt Eden station as well as two new underground stations, one at Wellesley and Victoria Streets and another at Karangahape Road. 

This will extend rail transport throughout the city, as well as linking Mt Eden to the Northwest rail line. These new routes have the potential to fuel growth in areas like Pitt Street and Mercury Lane and to further support thriving areas such as Karangahape Road, Britomart and Victoria Street.

Commercial property and businesses in these areas could experience an uplift in value upon completion of the City Rail Link but as we’ve seen, this is a double-edged sword, with many businesses suffering significant downturns in patronage during the construction phase.

South of Auckland, proximity to infrastructure is fuelling demand in the industrial property sector. Growth in the “golden triangle” between Auckland, Waikato and the Bay of Plenty regions can be attributed to ports in Tauranga and Auckland, and Auckland’s international airport.

New Zealand Transport Agency data shows that 56% of national freight movements pass through the upper North Island, while about 35% of the country’s exports go through the port in Tauranga. The government has earmarked $55 billion for roading and land transport projects within the golden triangle over the next 10 years.

South Island infrastructure spending

Only a small fraction of the Government’s recently announced $12 billion infrastructure package will go to the South Island, with Queenstown to receive $90 million for roading improvements and $159 million allocated to Canterbury.

In Southland, New Zealand’s largest privately-owned transport company, H W Richardson, has partnered with the City Council to redevelop Invercargill’s ageing central city infrastructure. With many of the buildings decaying or untenanted, the project will see most of a city block demolished and replaced with a retail and office development estimated to cost $240 million.

The redevelopment is designed to make Invercargill a more attractive place to live and do business, and while businesses that remain in the CBD during the development phase can expect a significant impact on sales, the majority of business owners support the initiative which is expected to draw tourists and locals back into the city centre. Some commercial property owners could be negatively affected by the new development however as it draws tenants away from their current premises.

The key to a successful commercial real estate investment is to do your homework and work with a commercial real estate professional who understands the dynamics of the local market.

Sources:
www.fgould.com
www.realestate.co.nz
www.nzherald.co.nz
www.odt.co.nz
www.stuff.co.nz
www.stuff.co.nz
www.cityraillink.co.nz


This article featured in NAI Harcourts Market Leader Issue 1, 2020

Commercial,

NAI Harcourts,

Commercial Property,

Investment Property,

Real Estate,

harcourts new zealand

Popular Listings

  • The Top Spot on Victoria Road
    Available for lease is a stunning retail shop consisting of approximately 83m² plus shared bathroom facilities with the tenancy directly behind. Positioned with fantastic exposure, located in the heart of Devonport's bustling town centre this space is ideal for a variety of uses. Take advantage of the high foot traffic and growing popularity of Devonport as a seaside destination for locals and visitors alike. This is a superb opportunity to get a prime position for the up and coming Americas Cup. Floor area: 83m² (approx.) plus a share in bathroom facilities. Features: - Wide street frontage - Light and bright retail tenancy - Close proximity to Devonport wharf - Generous street parking - Great foot traffic - Available now For more information and an appointment to view this well appointed space, please contact the SOLE AGENTS at NAI Harcourts today.
  • Takapuna Retail Showroom and Warehouse – Barrys Point Rd
    Situated in the heart of sought after Barrys Point Road in Takapuna, these large retail showroom, warehouse and office premises totalling approx. 1,462m² are available on a new lease from September 2020. Offering wide street frontage with excellent exposure and large front yard for display purposes or customer parking this building has been occupied for the last 10+ years as a successful Motorcycle Dealership providing sales, accessories and service facilities. Comprising retail showroom of approx 524m², mezzanine office 186m² and warehousing and storage of 752m² the premises include 6 car parks on the front yard, further 9 at the rear and option for additional basement car parks. Only 3 minutes north of the Harbour Bridge, Barrys Point Road is home to many outdoor sports, trade retail, automotive, furniture and service retail type uses. Call now to arrange an inspection of this exceptional opportunity.
  • Takapuna Office/Warehouse – Approx 212m²
    Smart workspace featuring a functional mix of office and warehouse space in central Takapuna. Features include polished concrete floors, full height glass partitioning, three good size partitioned offices, air conditioning, staff lunch room and easy warehouse access. FLOOR AREA: Total area approx 212m² FEATURES; - Modern office fit out - Roller door access - Affordable rental rate - 4 car parks - Available November 2020 Be quick, this is a rare opportunity to secure well appointed space in a sought after location offering easy access to the motorway and city. For more information and an appointment to view please contact the sole agents at NAI Harcourts.
  • Boutique Devonport Office
    Positioned on the first floor overlooking busy Victoria Street, Devonport Library and Windsor Reserve. Located in the heart of Devonport, this professional office at 33 Victoria Road has excellent profile along with access to the recently redeveloped Devonport Wharf. The office has exclusive use of a kitchenette and shared use of toilet facilities. Floor area: Approx. 49.6m² Car parking: Available upon request Features: - Superb location - Variety of cafes and eateries nearby - Air conditioning - Close proximity to Devonport wharf - Flexible availability For more information and an appointment to view this well appointed space, please contact the SOLE AGENTS at NAI Harcourts today.
  • Boutique Devonport Retail
    Shop 1 is a superb bite-sized opportunity to secure your place in the heart of Devonport. This arcade tenancy comprises of 32m² with exclusive facilities. The Arcade is home to a range of businesses including a cafe, Barber, Hairdresser and boutique retailers including 4 first floor office suites. With high pedestrian foot traffic off Victoria Road and street profile via Wynyard Street, this position will be hard to beat. The Total weekly cost is only $311 + GST per week (including outgoings). Features: - Superb location - Natural light - Character brick arcade - Close proximity to Devonport wharf - Through access to Wynyard Street - Short term retail opportunity for the right tenant - Available now Available Options - Shop 9: 30 m² For more information and an appointment to view this well appointed space, please contact the SOLE AGENTS at NAI Harcourts today.
  • 7.5% return on this tenanted investment! $1,626,000
    FOR SALE: Looking for a commercial investment property returning better than 7.0%? Check out this smart, modern two-level office building situated only minutes from the Papakura motorway interchange and a short walk through the town centre to the railway station. Well presented, the road front 605m² (approx.) building offers well-lit office space with a mix of open plan and partitioned areas. Including storage to the rear, accessed via a roller door there are 9 car parks on-site, 7 in front and two under cover. New 3+2+2 year lease from 3 January 2020 at $122,000 pa net (+gst) to Integrity Business Solutions Ltd (Payroll & HR Specialists). Don't miss this opportunity, our South Island vendors want it sold! For sale $1,626,000 (+GST) if any (7.50% return). For more information and an appointment to view please contact the Sole agent. To download the property file please paste this link into your browser: http://www.propertyfiles.co.nz/property/NSC29924