Syndication schemes in the limelight

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Research finds $1.5 billion invested in property funds between 2016 and 2019

Latest research from Colliers International shows that syndication companies were the second largest purchaser group for commercial and industrial property sold for $5 million and over in 2019.

Chris Dibble, research and communications director at Colliers, highlights in the recently released New Zealand Research report for March that the syndication sector has fared well on the back of a well-positioned commercial property sector.

New Zealand Research Report  March 2020

“Asset prices have risen steadily over the last few years driven by solid occupier fundamentals, low interest rates and competition for a limited supply of properties available to purchase.

“While local private investors remain one of the most active purchaser groups in New Zealand, the syndication sector’s presence has increased strongly over the past few years.

“Annual sales results are still provisional due to lags in official data reporting, but we can already see that syndication companies accounted for 21 per cent of commercial and industrial properties sold for $5m and over in 2019 – the second largest purchaser group by value,” says Dibble.

The syndication sector has been particularly active in the commercial office and industrial space. The research undertaken by Colliers shows that approximately $1.5 billion of investor funds have been collected for various commercial and industrial property schemes across New Zealand between 2016 and 2019.

“The ability of syndicators to tap into a wide and varied source of funds from investors continues to be a key driver of ongoing activity.

“Given the high levels of syndication activity already this year, and the outlook for low interest rates to continue, we expect syndicators will remain active in 2020,” says Dibble.

Analysis of the proportion of commercial and industrial sales in New Zealnd sold for $5m or more showcases syndicators have ‘squeezed out’ purchasing activity that more recently would have been taken up by the private sector market as well as unlisted property vehicles.

Dibble notes that this is likely to impact the share of the private sector’s purchasing activity to one of the lowest on record in the past few years.

“Looking ahead, the low interest rate environment is also likely to have an impact on projected pre-tax cash returns advertised for future schemes.

“The reduction in interest rates has been a key driver of asset value growth and yield firming over the past few years.

“Syndicators have had to follow suit to remain competitive, impacting the level of returns to be able to be distributed to investors.

“However, the current level and pace of take-up in schemes by investors, despite the potential for the projected returns to move lower, means we expect that demand will remain solid.

“Given short-term volatility in economic and financial markets at the moment, popularity will be high for schemes with sensible returns, low risk attributes and strong tenant covenants,” says Dibble.

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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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