Offshore investors itching to buy
Holidaymakers aren’t the only people itching for our borders to reopen. Overseas commercial property investors are keen to visit New Zealand and put their money where our offices, hotels and industrial sites are.
Brent McGregor, CBRE New Zealand executive chairman, and Todd Lauchlan, JLL’s New Zealand managing director, say the country is an attractive option for investors because of historically high yields.
Sales statistics show investor commitment held up despite the difficulties of doing business during the past year, and the country’s high-profile pandemic response has bolstered its reputation as a stable, transparent place to do business.
McGregor says the second half of
2020 saw the continuation of a strong investment market “although there was still a cautious but optimistic air to most campaigns.”
His firm saw continued asset price growth across the main markets with $2.9 billion of transactions in the $20 million-plus space for the year, consistent with the past six years.
Of the deals CBRE transacted in
2020, 36 per cent of bids were from offshore buyers but they concluded only 25 per cent of completed deals, “due to an inability to demonstrate acquisition conviction from afar combined with travel restrictions.”
McGregor says his firm experienced consistent transaction volumes, even with 6-8 weeks of strict lockdown: “2020 was a depth test for the local market and we quickly proved that we have more than enough appetite locally to sustain historic volumes and even firm prices at the same time.”
New Zealand-based private investors and local listed property entities stepped into transaction bidding in a big way. Office and retail took a back seat to the industrial and logistics sector, McGregor says.
JLL’s Lauchlan says New Zealand’s transparent property market continues to be a great attraction for offshore investors, some of whom have effectively been operating propertyowning businesses in this country for more than three decades.
“Historically we’ve had a lot of investment from Southeast Asia and Australia.
“From SE Asia you’ve got a mix of sovereign wealth funds and large family conglomerates or offices that have invested in New Zealand for years.
“They’ve expanded their footprint over time and continue to invest, develop and hold property here. They’ve invested in new developments and created a lot of new assets as well as investing in the assets they’ve already got.
“New Zealand’s been an attractive location for other Commonwealth countries as well – the pension funds out of Canada and the UK have always been investors here.
“They’re familiar with the legal system, the structure and the transparent property market and feel comfortable with the rule of law and that sort of thing. We run a Global Transparency Index which lists New Zealand as one of the most transparent property markets in the world so they see it as a good place to invest.”
Lauchlan notes that New Zealand has always offered a higher yield than some more mature Asian markets and that remains the case.
“Singapore, Hong Kong, Japan – particularly Tokyo – our returns are typically better than theirs. You’d normally expect to get a slightly better return in New Zealand than in Australia as well,” he says.
Auckland remains the first port of call. “Inevitably, because the market’s bigger in Auckland, there’s a bigger proportion of foreign investment here,” Lauchlan says.