Queenstown’s rapidly expanding tourism sector has driven the local economy, creating jobs which have supported amongst the fastest population growth in the Country. As the population has expanded so has demand for both residential and commercial property which has, in turn, triggered significant value growth and a development response.
Visitor Accommodation Sector Expanding
Plan Change 50 was made operative in late 2016. The plan change saw 14.5 hectares of land being rezoned “Queenstown Town Centre” which allows for higher density development, aimed at promoting apartment and commercial visitor accommodation development.
The first resource consent application lodged under the new zone has been for the development of a new hotel on a site currently occupied by four residential properties. The proposed development will comprise a 120 to 130-room, four and a-half to five-star hotel, up to 20 high-end shops and six food and beverage outlets.
A number of visitor accommodation schemes are underway or proposed at the current time reflecting the pressure on the sector from rapidly expanding tourist numbers. The average hotel occupancy rate in the peak month of January reached nearly 93% this year with the 12 month average sitting at nearly 81% up from just 74% two years ago.
Other developments currently under construction include the “Jucy Snooze Hotel”, a budget accommodation provider. The hotel will comprise 84 rooms and provide 256 beds in a mix of double or family / quad ensuites, along with pods, private spaces in a shared room that’s able to be completely enclosed. The hotel is being built in a site bounded by Memorial and Camp Streets and is due to be completed in October this year.
At 4 Henry Street, owners MiPad Holdings Ltd is developing a 54 room hotel while at Remarkables Park a further 75 units will be provided at the Wyndham Gardens project.
A selection of other proposed schemes and current status are included in the table above.
Retail premises within Queenstown’s CBD are tightly held with no vacancy within prime areas. There has been continued upward pressure on rental over the last year with rates of up to $2,200/m2 being achieved.
Development activity is centred on the Frankton area. Stage 2 of Five Mile has proved to be popular with retailers building on the success of stage 1. The precinct is home to The Warehouse, which relocated from Remarkables Park, Countdown and Noel Leeming.
Groundworks are underway at Queenstown Central with the retail offering to be anchored by Kmart which is entering the Queenstown Market for the first time. Kmart will occupy a 4,000m2 store within the precinct which will ultimately provide approximately 20,000m2 of retail space.
There is evidence that the scale of development within Frankton has capped rentals at present. While face rents of approximately $500/m2 for large format stores continue to be sought, incentives are increasingly in play.
While retail development may currently be ahead of demand this situation is unlikely to persist for long given the rapid expansion of residential development in the area.
Commercial Office Review
Office space has been in high demand within Queenstown pushing up rentals. Demand is particularly high for small floor plates within modern space in prime locations, this combination sees offices commanding rentals of over $350/m2.
Once again a majority of new development has occurred at Frankton. At Remarkables Park, Remarkables house was completed in late 2016 offering office, retail and hospitality space. The offices have met with strong tenant demand. Med Recruitment which required additional space as a result of growth has recently taken occupation relocating from its previous Queenstown headquarters.
Within the neighbouring Five Mile development, new offices are located within the ANZ Centre which has attracted companies such as Craigs Investment Partners. Cruickshank Pryde, a legal practice, has agreed terms to take space within the new Bayleys office, currently under construction in Frankton.
To date there have been few problems in backfilling space as tenants relocate to new, high quality space however there is potential for vacancies to increase within secondary grade buildings as the scale of new development increases.
A shortage of industrial land has resulted in a sharp rise in land values. At Shotover Court a 396m2 site sold to a car hire company for a price equating to approximately $1,825m2. While this sale reflects the fact that the section size was particularly small, sales of larger serviced lots can command prices of approximately $1,000/m2. Competition from large format retailers for land has added to the price appreciation.
Queenstown Lakes District Council is to review the supply of industrial land within stage 2 of its District Plan review.
Demand for new industrial premises has been strong which has elicited a response from the development sector. The value of industrial building consents issued in the year to June 2017 totalled $7.4 million, the highest figure for a June year since 2008. The 2017 figure is 69% higher than the average for the last 10 years.
An example of current development is M Space located on Glenda Drive at Shotover Park. Upon completion the scheme will comprise 15 units with warehouses ranging from 70m2 to 91m2. A number of units have approval for mezzanine floors and all have hardstands.
Sentiment Points to Value Gain
Results from Bayleys commercial property sentiment survey point towards further rental and value growth over the next 12 months.
Queenstown was top of the list for rent and value expectations for all sectors and in both the tenant and owners’ surveys.
More than 70 per cent of respondents in the tenant and owners’ survey expected values to rise in Queenstown over the next 12 months, the highest of all locations surveyed.