Market analysis study in Beachlands-Maraetai: Property market analysis

Abstract

Subject Property We, the research team, have been requested to undertake a market analysis study of a block of retail outlets currently under construction and for sale in the beachside community of Beachlands-Maraetai. The size of the property is 600 square metres, of which 120 square metres has been leased by a local real estate company. The balance of the property is vacant and being marketed locally. The development under construction is built of concrete blocks on concrete foundations with a long-run iron roof. Target Market The success of this development depends on the local expenditure patterns and growth of the local residential market. We expect only limited spending from out of Beachlands-Maraetai. This area has evolved primarily into a dormitory suburb of the Auckland region. Conclusions The current economic climate at the national and regional level is favourable for a development of this type provided it is properly researched and located. The underlying Auckland economy is diversified, soundly based and growing much faster than the country as a whole. The catchment area will continue to grow at a faster pace than the region, until the existing population has approximately doubled. The local population appears to be adequately served by the existing commercial operations and we identified no obvious deficiencies or gaps in the market. The only likely tenants for the vacant space (80 per cent of the total development) during the next two or three years at least, would be tenants poached from existing merchants in the area at significantly lower rents than are now being asked, or, similarly, new ventures which may be viable at lower rents. It would appear that the developer has not completed an adequate market analysis to identify the source of new tenants prior to commencing the project. Recommendations It is our view that the project cannot be economically justified and the construction should not have been built. We recommend that no further analysis be undertaken on this proposal unless there are indications that the property could be purchased for far less than it cost to develop. This would enable rents to be set low enough to attract tenants from existing premises. We have not investigated the financial strength of the developer to determine whether a forced sale may be looming. If it is decided to proceed with this proposal we recommend that further research be undertaken, particularly into surveying tenants, from competing premises, and shoppers, to identify their needs and intentions.