Weekend Herald

Covid has ‘ re­struc­tured in­vest­ment land­scape’

- Business · Retail · Investing · Industries · Colliers International · New Zealand · Mitre 10 · Blenheim · Plymouth · Bunnings Warehouse · PlaceMakers · TUI Inventory System · Countdown

There is buyer de­mand in the CBD, but there is also a dis­con­nect be­tween buy­ers and ven­dors with re­gard to pric­ing.

Blair Peterken

In­vestor de­mand for large for­mat re­tail and DIY as­sets is surg­ing as Covid19 con­tin­ues to re­shape the in­vest­ment land­scape, prompt­ing a string of sig­nif­i­cant trans­ac­tions in re­cent months.

Blair Peterken, Cap­i­tal Mar­kets Direc­tor at Col­liers In­ter­na­tional, says there has been a re­newed fo­cus on sin­gle- ten­ant as­sets with long leases.

“The global pan­demic has re­struc­tured our in­vest­ment land­scape for the time be­ing.

“There i s buyer de­mand in the CBD, but there is also a dis­con­nect be­tween buy­ers and ven­dors with re­gard to pric­ing. This means in­vestors are look­ing else­where.

“Covid- 19 has also prompted in­vestors to take a fresh look at their ten­ant covenant cri­te­ria. Long leases, and the abil­ity to op­er­ate at var­i­ous lock­down lev­els, are par­tic­u­larly sought af­ter.

“As a re­sult of these fac­tors, we’re see­ing huge de­mand for su­per­mar­kets, large for­mat re­tail and DIY as­sets with strong ten­ant covenants.

“This de­mand has trans­lated to a num­ber of sig­nif­i­cant deals through­out New Zealand since the first Covid19 lock­down.

“We have in­vestors lit­er­ally beg­ging for more large for­mat or longterm se­cure in­vest­ments. De­mand far out­weighs sup­ply as we head into the last quar­ter of 2020.”

Among the re­cent deals trans­acted by the Col­liers Cap­i­tal Mar­kets team was the sale of Mitre 10 New Lynn, which was pur­chased for $ 32.5m by Mitchell Mack­ersy to es­tab­lish a new syn­di­ca­tion scheme.

“Syn­di­ca­tors are strong per­form­ers at the mo­ment and are mak­ing the most of the cur­rent mar­ket,” says Peterken.

“Low in­ter­est rates have led to low term de­posit re­turns, so mum and dad in­vestors are seek­ing higher re­turns. Low in­ter­est rates also work in favour of syn­di­ca­tors, al­low­ing them to get out higher re­turns.”

Other notable deals trans­acted by the Col­liers Cap­i­tal Mar­kets team in the last 12 months in­clude the sale of Bun­nings Queen­stown, which sold for $ 28.6 mil­lion. It sold for a yield of 4.46 per cent — a record low for a Bun­nings prop­erty any­where in Aus­trala­sia.

Nu­mer­ous other large for­mat or DIY trans­ac­tions — in­clud­ing Count­down How­ick, PlaceMak­ers West­gate, The Ware­house Blen­heim and The Ware­house New Ply­mouth — are proof of where in­vestor de­mand sits at the present mo­ment.

Peterken says su­per­mar­kets like Count­down How­ick, and DIY stores like Mitre 10 New Lynn, are seen as “pan­demic- proof” in­vest­ments.

“As es­sen­tial ser­vices, su­per­mar­kets are able to op­er­ate at any Covid alert level.

“They also gen­er­ally of­fer long leases to a sin­gle ten­ant, which re­duces ex­po­sure.”

Peterken says other large for­mat re­tail­ers are also well placed to op­er­ate at var­i­ous lock­down lev­els.

“They are usu­ally stand­alone prop­er­ties with abun­dant car park­ing, which pro­vides for con­tact­less pickup and plenty of space for so­cial dis­tanc­ing.

“Many large for­mat re­tail­ers have also ben­e­fited from the re­cent boom in home im­prove­ment.

“With peo­ple able to travel less, home­own­ers are in­vest­ing more in their prop­er­ties.”

Peterken says he doesn’t fore­see a drop in de­mand for large for­mat re­tail as­sets any time soon, with record low in­ter­est rates fore­cast for early 2021.

“At times of un­cer­tainty, in­vestors seek out de­fen­si­ble as­sets.

“Large for­mat re­tail as­sets gen­er­ally tick all the boxes, from long lease terms to strong ten­ant covenants.”

Newspapers in English

Newspapers from New Zealand