Retail property investment outside NZ's major centres

Auckland is growing at a rate of knots. The Commercial Bay project is redeveloping an entire central city block, the City Rail Link is well under way, and a number of other developments and infrastructure projects should continue to boost the already thriving economy through 2018. 

Further south, Christchurch's rebuild is taking shape and the city is growing steadily, while Wellington is experiencing a shortage of commercial property following the 2016 earthquake. With investment conditions so solid in the major centres is it worth buying commercial retail property in smaller cities? 

The reasons for retail property investment outside of NZ's major centres

One of the most compelling reasons to buy outside of New Zealand's biggest cities is price. In Auckland the average asking price per sqm for commercial retail property is a massive $4,401, according to realestate.co.nz data. Further south in Christchurch and Canterbury it's $3,795 per sqm, and in Wellington the average is $3,498.

On the other hand, in smaller regions such as Otago and the Bay of Plenty, retail property sells for $2,215 and $1,539 per sqm, respectively. This means you get a lot more property for your money, which may make it easier to find a cash flow positive asset.

Furthermore, if you do your research and buy intelligently, it's possible to find retail property investments outside NZ's major centres that combines those high rental yields with strong capital growth.
 

Whangarei and Northland

In the last few years Whangarei's economy saw impressive growth, thanks to booming manufacturing, healthcare and retail industries. In fact, over the last year alone the Northern city's GDP grew by 2.7 per cent, even more than Auckland's, which grew by 2.6 per cent during the same period.  

Consistent year on year growth in the retail sector indicates that vacancies may not be as much of a problem in Whangarei as they might have been a few years ago. It also suggests that demand for commercial retail leases will only increase, placing upwards pressure on rents and driving capital gains. Council plans to build a new airport and the possibility of Auckland's port moving to Whangarei could further bolster the economy here in the long run. 

 

Tauranga and the Bay of Plenty

Tauranga is the economic darling of New Zealand's small cities. Last year employment increased by 4.8 per cent, and GDP grew by 4.4 per cent, nearly twice the New Zealand average, according to Priority One.

As an industry, retail was the fifth highest contributor to this growth, behind healthcare, education, administrative services and agriculture. However, thanks to the city's strong economy and fast increasing GDP per capita, there's scope for even stronger retail growth in the near future. 

There are plenty such properties for sale in the area too - over 10,000 sqm worth as of Q3, according to realestate.co.nz data. 
 

Otago and Dunedin

Agriculture, fisheries and construction are the main drivers of Otago's economy. However, the city council's plan for the future places an emphasis on improving its retail and cultural offerings in a bid to establish Dunedin as a world class city and tourist destination.

What's more, Infometrics has identified Dunedin as a potential spot for future commercial property investment thanks to its strong economic growth. Their data shows that the city is enjoying its lowest level of vacancies since 2011 at 12 per cent, and that rental yields average around 8 per cent.

Properties here don't sell often, however, so it may be challenging to get your hands on an asset that will work for you. To improve your chances start your search for retail property investments in NZ's regions using realestate.co.nz - the country's largest resource of online property listings.