October 2024 Market Update

Spring in Marlborough: Gearing Up for the Busy Season

As we head into the latter part of the year, our team is feeling energised. We’ve got a solid portfolio of listings and plenty of deals in the works. Our current properties are well-priced, and our sellers and landlords are ready and motivated. So, let’s dive into the latest updates…

Market Insights: A Positive Outlook

There’s a real sense of cautious optimism out there. The Reserve Bank of New Zealand’s recent Official Cash Rate cut of 25 basis points has led to a decrease in commercial lending rates, sparking renewed interest in the market. It’s the start of bringing lending rates to more manageable levels for investors and transactions are likely to increase in the commercial and industrial sectors, where borrowing costs are becoming more palatable.

The RBNZ is scheduled to review the OCR at 2 pm tomorrow Wednesday 9th October so make sure you are tuned in for the big reveal.

Spotlight on Owner-Occupiers and Investors

Owner-Occupiers

For the last two years, we’ve seen strong interest from the owner-occupier market. Many buyers see the benefits of long-term independent ownership over rental yields, making vacant properties more appealing than fully leased ones.

Recent Owner-Occupier Sales:

• 36 Maxwell Road: Sold to a local business operator.
• 3/24 Herbert Street: Sold to a new business moving to Blenheim—after sitting on the market for over 12 months with another agency, we got it sold within just a couple of months!
• 36A Maxwell Road: Another local business operator snapped this up for their own use.

Investors

On the investor side, recent interest rate drops have brought investors back to the market, with more enquiries and growing confidence. As we move towards 2025, investor activity is picking up. From our recent sales results, we’ve determined that approximately 30% of buyer enquiry is from investors who had been waiting on the sidelines but are now ready to act.

Recent Investor Sales:

• 28 Maxwell Road: Sold to a local investor.
• 2-8 Queen Street: Sold to Christchurch-based investors/developers for repurposing into offices and retail space.
• 1 Main Street: Purchased by an out-of-town investor.

The good news? If current trends continue, we should see even more activity toward the end of this year and into early 2025. So, for vendors, now’s the time to keep those listings active and visible to catch the emerging wave of keen buyers!

Leasing Market: Recent Developments

The Marlborough leasing market remains strong, though we’ve seen some pressure on annual rent increases due to OPEX insurance rising between 20-50% in some cases. This has driven up the gross rent packages for tenants, even before factoring in rent increases. Annual CPI adjustments and two-yearly market rent reviews have become the norm, helping landlords avoid fiscal drag while providing tenants with more manageable, gradual increases.

Recent Leasing Projects:

• Seymour Street/George Street Corner Block: We took over the marketing, sold it to a local investor, and divided it into six new office/retail spaces. At the time of writing, five have already been leased, with serious interest in the last one! We were also able to secure a location for Hell’s Pizza on Seymour Street for the same landlord.
• 75 Market Street: Leased to a new business coming to town.
• 33 Arthur Street: After being on the market with another agency, we quickly leased it to Cars2Go — the ideal location for car sales.
• 2-8 Queen Street: We’ve successfully leased two-thirds of the ground floor to Blue Penguin Gifts. They moved from Nelson Street and have already seen a big boost in business thanks to their prime location in the Blenheim CBD. We’re also getting solid interest for the first-floor office space and expect the building to be fully leased soon. Renovations and upgrades are also about to kick off, making this spot a highlight for the bustling High Street and Queen Street corner!

Retail and office spaces are still moving, though the market is currently a bit “fluffy”. Lease negotiations are taking longer, but occupancy remains high, with little ready-to-move-in office space available in Blenheim.

Retail vacancies are minimal, with some attributed to buildings with low NBS ratings. Fortunately, proactive landlords are stepping up with seismic strengthening, which is essential if they’re looking to sell, as banks aren’t keen to lend on properties below 67%NBS.

Lease Assignments – A Few More Than Usual

Lately, we’ve seen an uptick in tenants looking to exit leases earlier than planned, mainly to reduce costs. The good news? Marlborough Commercial have been able to promptly find suitable replacement tenants that are in business growth stages, ensuring a seamless transition for our landlords.

Development Spotlight: Design, Lease, and Build

Marlborough’s commercial real estate sector is heavily influenced by the wine industry, transport, and supporting sectors. We’ve seen increased demand for development sites, with many companies opting for design, lease, and build options.

Recent Marlborough Commercial Development Projects:

• Flight Industrial Park, Waters Avenue: We’ve leased all eight existing buildings. The most recent tenant, KAM Transport, occupies 5,300sqm of warehousing and an additional 7,000sqm of yard. We have five vacant design, lease, and build sites remaining, ranging from 1,000sqm to 5,500sqm, with concept plans out for potential tenants on two of them.
• Bristol Street, Riverlands: Tasked with repurposing the 15,000sqm Kono Mussel factory, we’ve leased the office facility, have a contract out on the front half of the existing factory and are in talks with multiple parties to redevelop the remainder of the site with new builds.
• Allied Fuel, Westwood: Bringing new business to Blenheim with a long-term land lease on the corner of Rene Street opposite the new Harvey Norman.
  There continues to be demand for build-ready industrial and commercial sites for both investors and owner-occupiers. Limited industrial zoning is causing pressure and we will start to see more of the older buildings, particularly in the Blenheim Central and Mayfield zones repurposed or demoed for new builds.

New Listings Coming Soon!

Marlborough Commercial is preparing to launch several key properties for sale and lease across industrial, commercial, and retail sectors. Keep an eye on our website for updates — exciting opportunities are on the horizon!