The Wairarapa economy has been growing steadily over the past five years, but since last year’s national level 4 lockdown is showing all the signs of having changed up a gear.
Spending in the region for 2020 was up 10.7% on the previous year – substantially more significant than anywhere else in the country. Over the past two years, and fuelled in part by increased interest from outside the region, the market has been strengthening for good quality, well-located commercial investment properties.
Cap rates have trended down with sub 7% in Masterton becoming increasingly common, some at sub 6%, and more recently sub 5%.
Changing work patterns with more people working from home or, as evident in several centres, mixing working from home with hot-desking, have reduced the demand for office accommodation with office rentals remaining relatively static.
Smaller, attractively presented offices priced to meet the market and well located for those needing or desiring an office presence do, however, continue to fill quickly. Demand for retail premises to buy or lease is a mixed bag that is location sensitive.
Whereas demand in Masterton, at least for smaller premises, has been limited, in the ‘Wellington playgrounds’ of Greytown and Martinborough, and recently also in the ‘Wairarapa gateway town’ of Featherston, high profile retail premises are keenly sought after and command premium prices.
In contrast, growth in the demand for retail premises in Masterton has come from the establishment of outlet stores by several of the larger national retail chains with other chains either committed to doing the same or signalling interest in doing so in the near future.
Despite increased spending in the region, potential business buyers, especially buyers of small businesses, remain wary of further lockdowns. As vaccinations increase, such fears can be expected to lessen, but for now, a number of businesses are remaining on the market for significant periods, although business owners with realistic price expectations are selling.
Clear signs of growing confidence in the local economy are evident in the further and planned development of industrial parks in Masterton and the number of owners of earthquake-prone buildings in Carterton strengthening their buildings rather than allowing them to remain vacant, with others considering demolition with the view to development.
A marked increase in the value of industrial land has been one of the more significant commercial changes to occur recently in the Wairarapa, and one reflecting the growing interest in and demand for industrial property nationally.
Early last year, good undeveloped industrial land in Masterton was selling for $65 to $85 per square metre. Over the past few months, price expectations for small parcels(<3000m2) of similar land have hit $250 per square metre. The shortage of industrial land coupled with the growing demand for industrial property may soon push prices higher.
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