Yield-hunting offshore investors put NZ on the map

Yieldhunting offshore investors put NZ on the map

New review of 2019 commercial property transactions finds the market remains bouyant

The global hunt for higher-yielding commercial property assets has propelled New Zealand onto the world stage, leading to a significant uptick in offshore investment at the top end of the market.

That’s according to Colliers International’s 2019 New Zealand Transaction Review, released this week.

The report was prepared by Colliers International Research in collaboration with the agency’s market-leading Capital Markets team.

Download 2019 New Zealand Transaction Review Research Report

It found 2019 had been another outstanding year for commercial and industrial property in New Zealand.

Peter Herdson, National Director of Capital Markets at Colliers, says transaction activity has been bolstered by positive market dynamics.

“These dynamics include supply and demand imbalances, solid employment rates, benign tax requirements, high transparency and low interest rates.”

Herdson notes private, local investors remain the lifeblood of sales activity in the commercial and industrial sector for many parts of New Zealand.

“However, New Zealand real estate has also been actively pursued by offshore investors. This is important for the long-term stability and health of the sector, along with the additional depth and liquidity it provides.”

Richard Kirke, International Sales Director on the Capital Markets team, says the global hunt for higher yielding assets has propelled New Zealand onto the world stage.

“Access to flagship properties with market-leading returns, diversified and defensible property portfolios, and the creation of new, international-grade property in New Zealand are pivotal to this.

“Given global market conditions and the attractiveness of our stock, it is hard to see this enquiry slowing.”

The report found increasing depth and steady growth in transactional numbers above $5 million. There is also less cyclical volatility in sales activity for properties selling at or above this price point.

Kirke says a review of the types of purchasers seeking properties $5 million and above since 2016 shows sizeable growth in syndication, listed property vehicles and offshore parties.

“An increasing number of offshore investors have entered the local market, particularly in the last five years, with a focus on flagship retail and office assets.

“Nationally, offshore investors accounted for 72 per cent of all office sales of $50m or more between 2017 and June 2019.

“More recently, offshore parties have also been targeting industrial properties, both vacant land and buildings.”

The report found obstacles to the ongoing growth of the sector include global economic fluctuations and the potential for a slowdown in economic activity locally, predominantly driven by lower business sentiment.

Chris Dibble, Director of Research and Communications at Colliers, says growth is currently slowing from super highs.

“However, a floor slightly below long-term averages seems to be achievable, which will alleviate risk concerns.

“Indeed, the foremost challenge to increasing sales turnover is the ability for investors to source properties to purchase.

“While activity is solid, and opportunities do arise, it will be testing for investors looking to grow their portfolios.

“Along with the view that interest rates will remain low for an extended period, investors waiting in the wings will add to pent-up demand that will drive value further upwards, especially in the $20 million plus market.

“Active investors seeking out prospects, both on- and off-market, will be presented with the most opportunities – fortune favours the brave.”

The report found approximately $10 billion of commercial, retail and industrial property has transacted each year in New Zealand over the past four years, with some 5,000 to 6,000 properties changing hands each year.

This represents 5 per cent annual turnover by value within New Zealand’s $217 billion commercial property sector – a similar turnover rate to the $1.1 trillion residential sector.

Strong growth in the $2 million to $4.9 million market since 2011 highlights the attractiveness of this price point for investors as well as the incremental price creep, especially in the past decade.

About 50 per cent of annual sales activity is in the industrial sector, while retail makes up around 25 per cent.

There has been no significant variation in retail sales activity despite reports of more challenging conditions for some retailers.

The office sector has lower turnover than the industrial and retail sectors, but higher aggregate price volumes. This reflects the scale and higher value of office premises, especially in main city CBD markets.


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Chris Dibble

National Director | Colliers Partnerships, Research & Communications

Auckland CBD

My Colliers Partnership priorities focus on support initiatives that drive collaboration, best practice learning, cost efficiencies and growth opportunities across the wider Colliers International New Zealand franchise network. I also oversee the collaboration and delivery of award-winning research reports and communications for Colliers. With over 13 years of experience and university qualifications in economics, geography, marketing and property. I have a multi-disciplinary approach that assists a broad range of clients and internal stakeholders. I am a regular presenter and market commentator, often discussing the latest insights on current and future property trends. I also work with in-house and external writers to curate an audience-focused content delivery strategy for Colliers.

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Peter Herdson

National Director | Capital Markets

Auckland CBD

In 1993 Peter returned to New Zealand from the United Kingdom with several years’ experience in property management and development. During this time, he worked for Vanson Developments (Richard Branson´s property development company) for two years, and in investment and management for Fuller Peiser (Rolls Royce and Vickers Pension Funds). Upon his return to New Zealand, Peter joined Colliers International (NZ) Limited, where he has been ever since.

Peter now leads the Colliers International Capital Markets division, based in the Auckland CBD. The team is proud to have established a new approach to collaborative working within their division, a first the New Zealand marketplace. 

The “Power of Five” approach with the Capital Markets team has driven exceptional outcomes for client service since 2007. The team has adapted a charter unique in the market, with over 100 years of combined experience. The personal and professional networks of 5 directors operating as a cohesive team across all projects, provides maximum leverage and market coverage for our vendors. It ensures an acceleration of all our clients success.

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Richard Kirke

Director | Capital Markets

Auckland CBD

Richard is responsible for the promotion of New Zealand property to international investors, leveraging of his relationships developed in executive positions during his near 8 years in Hong Kong, as well as assisting to grow the company’s nationwide Rural and Agribusiness agency capability.

Richard began his real estate career in 2004 with CBRE, in the five years he spent with them (before leaving to run Colliers Hong Kong business in 2008) he was involved in many notable transactions including the sale of the Lion Nathan site in Newmarket for $162m, the sale of the GE & BNZ Britomart properties on behalf of Manson’s to the German fund HIH and portfolio sales, including the successful auctioning of 16 National Bank Branches across New Zealand.

During his time as MD of Colliers Hong Kong he was involved in the sale of 50 Connaught Road on behalf Apollo Group (a New York based Hedge Fund) to the Agricultural Bank of China for $US632m.

Richard was the Managing Director of Colliers Hong Kong office for six years from 2009-2014. During this time he was an active participant in several high value transactions and developed broad relationships with both Asian investors and colleagues across the region.

In late 2014, Richard agreed to run CBRE’s Asia Pacific Capital Market business, including their Capital Advisory (Real Estate Investment Banking) business, this further added to his knowledge of real estate investors, particularly in greater Asia.

As a senior executive of Colliers for 6 years in Hong Kong, Richard has strong personal relationships with Colliers personnel across the globe.

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