23The National Business Review / August 28, 2015

Sir Robert Jones

In monetary terms commer-cial property is the third most important investment outlet behind the share and bond markets.

For funds struggling to place their cash, ceaselessly pouring in, commercial property’s major appeal lies in its scale, specifically the ability to unload large lumps of money on a single build-ing.

Today, office towers changing hands for $100 mil-lion or more are unnotewor-thy. By comparison there are no New Zealand listed com-panies in which one could take a $100 million share position without consider-able time-consuming effort, which would inevitably necessitate paying a premi-um and even then, with no guarantee of success.

Given all of this, the most surprising thing about com-mercial property is the total lack of sophisticated analy-sis, particularly when com-pared with the sharemarket. The largest international real estate agencies all have

research departments but, primarily, these are staffed by valuers. They will accurately detail salient current data and even make short-term two year projections but that’s about it.

For example, last year I was called as a Crown wit-ness in a much publicised contentious case revolving around the investment value of a historic city building. The cross-examination went like this. “So you’re saying the valuers have got it wrong?, the opposing barrister put to me. I replied, “You might just as well seek a florist’s view. Valuers are simply price historians and, unlike the sharemarket analysts, are not trained in investment analy-sis. Investment analysis is not about today, or next year, but about what will happen in five and 10 years time. On property valuers’ approach they’d rate Amazon, [then] valued at $US150 billion, as worthless as it’s never made a profit.”

It gets worse, especially in New Zealand. Earlier this year the Dominion Post, now heavily reliant on its pages

of commercial advertising, in a decision of monumen-tal insanity, published the wisdom of Aucklander Ollie Newland, on commercial property. Mr Newland dab-bled with Auckland flats and houses in the 1970s, formed a commercial property com-pany in the 1980s which, unsurprisingly, went broke. Then, acknowledging the old adage that if you can’t do

it, teach it, now in his mid-70s, ekes out an existence, according to an interview, from a broom cupboard behind some shops, advising budding residential property investors. On these non-cre-dentials he was allowed to vent appalling tripe.

“The majority of the population don’t understand how commercial property works,” he opined, an inane

remark, for why should they? His subsequent com-ments showed he’s deep in the bowels of that ignorant category, particularly his ludicrously naive, “Investors should make sure there’s an existing good quality lease in place … everything else comes second.” That is igno-rant poppycock. What comes first by a country mile is loca-tion, followed by building quality, then a host of other considerations.

Tenancies are utterly irrelevant if the right prop-erty characteristics exist, as through thick and thin they automatically follow. Put simply, invest in buildings,

not leases. Unlike Mr New-land, sophisticated commer-cial property investors know the best opportunities come from buying empty build-ings, which is why my com-pany has recently tendered for three in London’s finan-cial district.

Publishing Newland’s “wisdom” on commercial property is akin to seeking Dotcom’s tuition on pole-

vaulting. Does this matter? Abso-

lutely. I despair at the steady flow of troubled people, seeking my advice, following such ill-thought commercial property investment ration-ales.

Invariably they’ve been lured into a bad deal by a lease temptation, without regard to the building’s loca-tion and quality drawbacks, plus the fact that leases ulti-mately expire. Typical are syndicates targeting small investors, which concentrate solely on the lease, some-times for bad buildings.

More important was the Reserve Bank’s excellent

March Bulletin tracing how worldwide, cyclical econom-ic downturns have inevitably turned into serious finan-cial crises, solely because of commercial property col-lapses and their huge impact on banks.

I’ve watched this recur-ring pattern for over half a century and, while much of it comes through specula-tive development hubris, a significant contribution also stems from the troubles aris-ing through the purchase of badly located and designed buildings, temporarily occu-pied during the bust’s pre-ceding boom.

Newspapers have an implicit duty of care which is why the Dominion Post was negligent in quoting this clown. Furthermore, he subsequently aired the same nonsense in The Herald.

On a happier albeit self-interested note, this extraordinary lack of deep investment analysis in the global commercial prop-erty sector, means it is easy to make fortunes. It’s why I employ academic and not commercial types in my top management team as they’re imbued in thoughtful research and contemplation. Our discussions invariably revolve around five and 10 years out, admittedly not much value to me at my age but I enjoy it nonetheless.

Invest in buildings, not leases

The property market is on many investors’ radar. Some dive in successfully, while others flounder about. For both, this is a fickle and difficult sector in which to operate and it’s hard to know who to approach for advice. This special feature provides the opportunity for industry experts in the property markets to share their knowledge, experience and insight about the commercial property industry.

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Tenancies are utterly irrelevant if the right property characteristics exist, as through thick and thin they automatically follow. Put simply, invest in buildings, not leases

Sir Robert Jones

Chris Hutching

Retailer Smiths City is cutting debt with the $20 million sale and leaseback of its central Christchurch store in Colombo St.

Smiths City is facing the same challeng-es as counterparts around the country as sales in appliance stores ease.

Turnover was down 2% this year com-pared with 2014, shareholders at the annual meeting heard this week.

Shoppers are spending less in places most exposed to the rural sector such as

Oamaru, Greymouth, Gore, and Timaru. Spending in Westport is also down.

The company has closed seven stores in the past 18 months under its Powerstore and LV Martin brands. The most recent closures were on the Kapiti Coast and in Nelson and Timaru.

Smiths City survived a seven-year peri-od under receivership in the 1990s but now faces challenges again from slim mar-gins and changed trading patterns.

The June year-end profit of $2.6 million compares with $5.6m the previous year.

Smiths cuts debt with HQ sale

Special Report

Investing in commercial property

Phot

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Kar

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24 PROPERTY: INVESTING IN COMMERCIAL PROPERTY / The National Business ReviewAugust 28, 2015

Sally Lindsay

Auckland’s Albert St is poised for huge growth in land and property values as well as rents, as it undergoes a complete transformation over the next decade.

Land values are already rising. Recent sales have been in the $10,000-13,000 a square metre range and further increas-es are expected as the street is rejuvenated.

Major local and interna-tional developers have plans for projects ranging from $600 million-plus skyscrap-ers down to four-level addi-tions to character buildings and other properties are rumoured to be on the verge of sale to mainly foreign buy-ers.

Albert St is part of what the Auckland Council calls “the engine room” – essentially, the city’s inner CBD. Although it is an important part of the council’s city masterplan, the street is often described as austere and disappointing despite qualities such as its gentle descent to the harbour’s edge.

That is about to change. During the construction of the $2.4 billion city rail link and new Aotea station, which is expected to be a tower block of similar size to the Down-town shopping tower redevelopment, the street will be trans-formed with wider footpaths, more trees, refurbished heritage buildings and a number of substantial developments. Work is due to start at the beginning of next year.

The Albert St of today will be barely recognisable within a decade.

The regeneration of this part of the city has gathered pace since the council signalled lower Albert Street will be used for the city rail link and Sky City announced it was building an international convention centre in exchange for more gaming machines.

Although it will mean 5-10 years of disruption, owners of property in Albert St are likely to see values increase as people clamour to get a piece of the action.

The recent sale of the 1879 Blacketts building on the cor-ner of Queen and Shortland Sts, which houses Florsheim Shoes, is an indication of the way city commercial prices are moving.

It has climbed about $4 million in value between two sales just one year apart. It is rumoured the new owner is planning retail over two floors. First floor retail is a well-established overseas trend, but has never really been adopted in New Zealand, apart from in malls. As lower Queen St runs out of available retail space, it is expected to become the norm.

Given its existing customer base, first out of the blocks for office and retail redevelopment is likely to be Precinct Proper-ties. It is spending $550 million on a 180-metre, 36-level sky-scraper as part of its revamp of the Downtown Shopping Mall, which will expand from 13,000sq m to 20,000sq m.

Auckland Council has sold Elizabeth Square on the Queen St side of the shopping centre to the company for the new development and, in return, Precinct Properties will time the building of its new office skyscraper and retail project to coin-cide with a start on construction of the city rail link tunnel directly beneath the site.

Further up at 7, 9-11, 13 and 15 Albert St and 9 Wolfe St, the Food Alley site is rumoured to be for sale. Concept plans were previously drawn up by renowned British architects Fos-ter + Partners for a new office tower with 50,000sq m of gross floor area. The site has yet to be signed up but it is understood there is interest, particularly from Chinese investors and developers.

On the corner of Albert and Swanson Sts, Conrad Group has Park Residences, a 29-storey mixed-use retail and resi-dential tower overlooking St Patrick’s Square under way. The freehold project includes 14 retail shops at street level and a 19-site food court spread over two levels.

On the drawing board is Manson TCLM’s $675 redevelop-ment of the 4285sq m NZ Herald site at 46 Albert St, which spreads from Wyndham St down to Mills Lane.

The plans for what will be the city’s tallest office tower at 190 metres include a 150-175-room hotel, 40,000sq m of office space on 1500sq m floorplates with 3.2 metre stud heights, luxury brand shops, a garden penthouse viewing floor and 300 car parks. Manson TCLM has already obtained demolition consents.

The LK & M site at 51-53 Albert St has been sold a couple of times recently and there is a rumoured conditional $9 million agreement on the site for yet another sale. It has resource consent for a 46-storey apartment tower.

Two 1920s constructed adjoining buildings

at 83 and 85 Albert St have just been sold to law firm Kirkland Morrison as premises for its practice, in a deal brokered by Jonathan Ogg of CBRE.

The sale equated to $12,800 a square metre. Mr Ogg says it is possible to add further floors to the character property. The buildings have attractive character facades with period fea-tures such as sash windows and decorative plasterwork, typi-cal of many of Albert St’s older commercial buildings.

At the bungy jump site on the corner of Albert, Elliott and Victoria Sts, Shanghai-based developer Furu Ding is planning to start early next year on the country’s second-tallest build-ing.

NDG tower, at just 119 metres short of the 328-metre Sky Tower, will be a $350 million, 209 metre, 52-level skyscraper housing apartments, shops, restaurants, cinema, two sky-deck areas and a possible 302-room Ritz-Carlton hotel. The development is expected to take five years.

While bricks and mortar dominate the skyline, the CRL gives the council and private developers the opportunity to make the street more attractive to office workers and shop-pers.

However, the challenge is to also provide green space and, to this end, the council has designed a linear park running from Albert Park along Victoria St to Albert St. Fewer traffic lanes, wider footpaths and a wave of green vegetation will give Victoria St up to Albert St a picture postcard image.

Further up at 135 Albert St, the council’s headquarters, a review of all council assets could mean the building is sold and then leased back to the city fathers. The council paid $104 million, spent $24.5 million on fitting it out for staff and coun-cillors and an additional $28.9 million in capital costs will be poured into the property over the next decade.

The council is looking at all its assets as it seeks alternative ways to fund projects.

Mr Ogg says the transformation of Albert St is inevitable. “As lower Queen St has become the home of luxury interna-tional brands with rents pushing $4000 a square metre, we will see more focus on Albert St as it becomes the home of the second-tier of swish shopping brands.

“Rents are as low as $500 a square metre in some parts of Albert St but, with many projects planned for the street and improved infrastructure, rents will rise, though there will always be a gap between Queen and Albert Sts,” he says.

The council is planning for 128,000-140,000 workers and upward of 45,000 residents in the city centre by 2032, giving a density level of 8000-plus people per square kilometre of the

CBD’s four square kilometres. “They have to be housed and work somewhere. Both local and foreign developers have been eyeing the street for some time,” Mr Ogg says.

“Many of the new workers will be hired by firms leasing space in the new office developments, particularly at the bot-tom end of Albert St. The council’s development framework and opportunities include large commercial buildings with-out height restrictions,” he says.

According to council statistics, almost one in three jobs in the business services sector are located within the city centre, accounting for 50% of all jobs in the CBD.

Employment projections estimate the city rail link will be the catalyst for 5000-20,000 additional jobs by 2041. Office development is high on the council’s priorities, with the rede-fined “engine room” the focus for new premium and A-grade office towers.

The city rail link’s Aotea Station will consolidate Albert St’s role as an important destination hub in the city centre.

Decade-long makeover of ‘austere’ city street

PROPERTY: INVESTING IN COMMERCIAL PROPERTY 25The National Business Review / August 28, 2015

Travelodge Welly

The 132-room, four-star Travelodge Hotel in Wellington is for sale. The property is owned by Australian-owned Toga NZ No 1. The hotel is subject to a new 15-year manage-ment agreement to international operator TFE Hotels (Toga Far East Hotels) under the Travelodge brand. It is located in the heart of the Wellington central business district and includes 132 guest rooms, a restaurant and five conference and meeting rooms. It underwent an $11 million refit in 2009 when it was rebranded as the Travelodge Hotel Welling-ton. Land records show it has a rating value of $13 million. The building, with a seismic rating of 100% of new build-ing standard, was formerly part of the Plimmer Complex, which also encompassed a 14,595sq m office tower and car park. The Plimmer Complex was subdivided into three separate freehold strata-titles and the hotel is the final offer-ing following the recent sale of the office tower and car park. The office tower was sold to Wellington First Properties, whose directors are Geok Tan and Tong Tan of Singapore, in November 2014 for $17.5 million.

AIA’s property

Auckland International Airport receives nearly half its oper-ating income from commercial property – $228 million of the total $508 million turnover. The NZX-listed company this week reported its annual earnings, which reveal retail income of $132 million, car park income of $46.6 million, and commercial property income of $50 million. “The trans-formation of our non-aeronautical land has continued and Auckland airport is becoming New Zealand’s most popular new business park. Occupancy of our $763-million property investment portfolio now stands at 99.9% and in the past 12 months we have seen an exciting range of businesses decide to relocate to the airport, including Coca-Cola Amatil and Fuji Xerox. Our two hotels, the Novotel and Ibis budget, not only have provided much-needed accommodation for travellers this financial year, they also have been very suc-cessful business ventures.” Auckland Airport has started work on the design for a third hotel.

Precinct well positioned?

Is listed Precinct Properties preparing to pick up new acqui-sitions? With a gearing ratio of just 20% (11% after settle-ment of pending sales), the company seems well positioned, although it has significant capital commitments tied up with its development block at the bottom of Auckland’s Queen St, with three buildings, and a fourth in the planning stages, as well as another two buildings just across Albert St. Pre-cinct has been innovative in its funding sources – in the past year, it has raised around $350 million from issuing bonds (an off-balance sheet liability), equity and loans from US institutions. The US loans are in US dollars, but “hedged to remove all currency risk, a first for the New Zealand property sector” – well that was the story in the annual report written before recent global financial events. “In particular we were very pleased with the outcome of the US transaction, which was fully swapped back to New Zealand dollars to remove currency risk,” the annual report says.

Fresh landing

The Landing at Wigram Skies, Christchurch has a new ten-ant – Mexicali Fresh, the 14th store since its inception in 2006. The Landing is a “$40 million” town centre under con-struction at Ngai Tahu’s mixed use development at Wigram Skies in west Christchurch.

New logo/brand

Hoteliers in Queenstown have a new tool – Destination Queenstown’s new brand. “Initial research began in late 2013 to review Queenstown’s brand health, reputation and position,” an organisation document explains. “This includ-ed assessing the motivations and needs of Queenstown’s visitor market to ensure the Queenstown brand aligned and represented the positive tangible and emotive values associated with Queenstown. The extensive research was distilled down to four main brand pillars, which are the foun-dation of the brand and represent the sense of escape for visitors by coming to Queenstown, the majestic landscapes, the openness and warm welcome extended to visitors and the unique and vibrant energy of this place.” The new logo has the appearance of coloured triangular shapes presum-ably representing mountains. The cost of the research was $24,000 and about $35,000 has been invested in the “crea-tive development and design process of the brand.”

AROUND THE TRAPS

Chris Hutching

The suburb of Hornby on the western outskirts of Christchurch has one of the largest concentrations of industrial activity in the city and New Zealand.

One of the latest develop-ments under construction is a 1ha factory by developer Calder Stewart for Fletcher subsidiary Easysteel.

Calder Stewart will either retain the property at Sir James Wattie Drive or sell it, with Easysteel signing up for an 18-year lease.

Easysteel will join other tenants on the Calder Stew-art business park including McDowell, Foodstuffs, Sleep-yhead, Calder Stewart, Epoch and Maxwell Contract Ware-housing.

The structural steel sec-tor has grown its share of the Christchurch multi-level construction market to more than over 60% from virtually nil a few years ago.

Industry proponents have promoted steel as a building material with recognised per-formance in seismic-prone areas. There are about 80 steel fabricators nationwide.

Recently completed Christchurch projects, or projects currently in devel-opment using locally fabri-cated structural steel include the recently completed Forte Health medical centre in Kil-more St, commercial build-ings at 335 Lincoln Rd and 219 High St, the Botanical Gardens Visitor Centre, and the Isaac Theatre Royal.

Meanwhile, NZX-listed Goodman Property Trust is selling five of its industrial properties in Christchurch.

They include three new

buildings in the Goodman-owned Glassworks Industry Park, Hornby and another two in the Show Place Office Park at Addington – arguably one of the most significant property portfolios to come onto the market since the Canterbury earthquakes.

John Dakin, chief execu-tive officer of Goodman (NZ), says the disposals are part of a wider asset sales pro-gramme.

“We are focused on organic growth with increased levels of develop-ment activity being funded through asset sales.”

The trust completed almost $150 million of asset sales in the last finan-cial year with about 25% in Christchurch.

Mr Dakin said Good-man expected to announce between $100-150 million of new development projects this financial year, funded through asset sales in Auck-land and Christchurch.

Goodman Property Trust has developed about 40,000sq m of industrial and office space in Christchurch since 2008. Occupier or cus-tomer demand remains strong in all of Goodman’s estates with the majority of recent new development projects announced at High-

brook Business Park in East Tamaki, Mr Dakin says.

The Glassworks Industry Park portfolio comprises four buildings housing premium businesses tenants MOVE Logistics, DHL, Packaging House, Cirtex and Bridge-stone. The total net lettable floor area is nearly 30,000sq m spread over 3.5ha. All the buildings were completed in 2014 and have a staggered lease expiry.

Late last year, Good-man sold Placemakers and Big Chill at the Glassworks. Placemakers fetched $7.2 million, representing a 6.5% yield. The sale was made up of $6.45 million for the building and $750,000 for the 3,000 square metres of expansion land. Big Chill sold for $7.1 million, with a 7.1% yield.

Mr Dakin says the trust will only sell if the price is right.

Goodman Property Trust is one of the biggest property companies listed on the NZX and regularly recycles prop-erties to raise capital for new developments.

According to Forsyth Barr’s most recent analysis the listed property sector is fully priced.

In the context of Christchurch, industrial leas-

ing specialist Greg Mann who recently joined Bayleys from NAI Harcourts says the market may be peaking.

There have been big mar-ket changes since 2014, he says.

In Wigram, Sockburn and Hornby there has been a lot of leasing activity but there have been some big increas-es and decreases in availabil-ity of specific stock of certain sizes, which in some cases have not followed the same trends, he says.

“In the past we’ve seen more leasing activity when there is a lot of stock avail-able.

“Right now, the situation is unique in that industrial vacancy has increased due to increased supply and a lot of new properties being built but we continue to enjoy a relatively strong underlying economy. It will be interest-ing to see if this translates into very strong leasing activ-ity.

“Rental rates are strong and yields have been drop-ping. The handbrake is firmly on the dairy industry. For years there has been plenty of dairy money to go around but the tap has been turned off and the trickle down affects may become quite serious.

“I’ve been asking some of my clients who have thought about selling properties whether they think the mar-ket is at or near the top of the cycle. As it’s impossible to know before it’s too late, selling at a point you think is near the top is about as good as you can call it.

“Personally, I think we’re at the top of the cycle,” he says.

More action in Hornby by Fletcher and Goodman

Chris Hutching chutching@nbr.co.nz

Sally Lindsay slindsay@nbr.co.nz

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Conrad Properties’ residential and retail tower

Precinct Properties’ new Downtown office and shopping complex Street improvements after the city rail link is built

Auckland Council’s proposal for a linear park along Victoria St to Albert St

GLASSWORKS INDUSTRY PARK: Three new buildings in the park are on the block

LEADING COMMERCIAL PROPERTY AND funds management company, Oyster Group, is going from strength to strength and offering a growing line-up of investment products for investors to choose from.

Since it brought on ASX 200 listed Cromwell Property Group as a 50% partner 12 months ago, Oyster has built scale and been able to provide investors with access to more frequent commercial property opportunities.

It has continued to publicly offer retail investors high quality commercial properties, whilst also offering private placement property investment oppor-tunities for small investment groups.

Oyster’s drive is to enable as many investors as possible to invest in the com-mercial properties and funds which the company offers.

The reduction of the minimum invest-ment to $50,000 in its more recent public offers has proven a successful step in this direction, with new investors comprising more than 50% of total investors in its two latest public syndication offers – the Cardinal Logistics building at Westney Road in Mangere and the ANZ Business Centre in Corinthian Drive, Albany.

Commercial property returns, particu-larly in New Zealand which substantially outshone the global market last year, are increasingly being seen by many inves-tors as an attractive complement to lower bank deposit rates.

Well located assets have historically also proven robust through changing economic cycles.

Strong Investor Appetite for a ‘Suite’ of Investment ProductsOyster’s Chief Executive, Mark Schiele, says the company now has strong inves-tor appetite for investment opportunities beyond traditional single asset syndicat-ed property investment structures.

“With current interest rates, inves-tors are seeking alternative options for income and they tend to be drawn to bricks and mortar investments.

“Commercial property returns are attractive. Against this background, it’s beneficial for Oyster to continue to create and offer a suite of products which meet a range of investor requirements.”

Schiele says this is particularly impor-tant for investors who may have a rela-tively modest level of capital to invest.

“We do not want commercial property investment to be seen as out of reach. It needs to be accessible for as many poten-tial investors as possible.”

Oyster in Top Tier of New Zealand Commercial Fund ManagersOyster has built an enviable reputation for reliability and success in property funds management, where it is a rec-ognised market leader in sourcing and structuring property funds, capital rais-ing and asset and property management.

Its growing Property Funds Manage-ment business provides investment man-agement, asset management, property management, development manage-

ment, leasing and transaction services to the Group’s portfolio.

“We’re focused on providing optimal investment returns and building investor wealth through the careful selection, acquisition, structuring and management of commercial properties and property portfolios throughout New Zealand.

As part of its offering, Oyster handles the day-to-day manage-

ment of all property funds including property and facilities management,

accounting and distribution of income to investors.

Schiele says proportionate ownership of commercial property will continue to be attractive for groups of individu-als looking to passively invest in assets of significant value without any of the hassle of daily management – all the work is done by Oyster. Because the properties are fully managed, investors do not need to be experts in strategically evaluating, owning and managing buildings and ten-ants.

Outside of syndication and property funds, Oyster continues to extend the management services it offers to third party private and institutional owners – in particular in the retail property sphere where the Group has specialist expertise. This growth includes providing develop-ment management and retail leasing ser-vices to clients.

Expanding the Investor Offering Long TermOyster is planning to launch a Direct Property Fund in coming months, offer-ing investors exposure to a diversified portfolio of quality office, industrial and retail assets throughout New Zealand. It will deploy investor funds in to a variety of assets which fit the fund’s investment mandate and criteria covering location, lease term, tenant quality and occupancy.

It is the company’s intention to grow the fund relatively quickly, to provide investors with investment opportunities not available elsewhere.

Become a Commercial Property InvestorOyster Group manages over $750 million of property assets through a combination of property funds, syndicates and third party client property management man-dates.

“With over 25 years’ experience in the commercial real estate sector, we strongly believe that commercial property assets are one of the most reliable investments available, and we want to share that opportunity with as many investors as possible,” says Schiele.

MUCH HAS BEEN WRITTEN recently about overseas purchases of New Zealand property.

Most recently attracting atten-tion was KPMG’s analysis of Foreign Direct Investment in New Zealand assets, saying that 59% of overseas investment comes from North America, Australia and Europe - and in particular from Canada, at 22% of total investment.

However, while it is good news that overseas investors are attracted to the fundamentals of New Zea-land property assets, this activity is in reality only part of the current investment picture.

Onshore investment still leadingAndrew Stringer, National Direc-

tor – Capital Markets for CBRE New Zealand, says that the attention on overseas buyers masks another, equally real trend: Kiwis are mak-ing the bulk of the strategic land purchases, particularly in Auckland, with a view to meeting a range of demands for growth.

“CBRE has been involved in more than $180 million of land transactions over the past 12 months,” he says. “Of this total, 63% by value were to onshore, New Zealand, buyers - and if you view the transactions by land area, the proportion is closer to 70%.

Most buyers local“Amid the speculation around the motives and identity of overseas purchasers, our investment sales record highlights that the majority of transactions are to onshore par-ties who are focused on meeting the demand for growth in Auckland as soon as practicable.”

Stringer says that the demand for land is a response to clear

market dynamics for increased residential and commercial supply, particularly in Auckland.

“Purchasers have confidence in buying non-income-generating land and holding it while they determine an optimal development scenario,” he says. “All the purchas-ers we are talking to are seeking to develop land reasonably quickly. They are not displaying what many commentators have characterised as land banking simply to make capital gain.”

He adds that, unsurprisingly, investment is strongly focused on areas with significant current and proposed investment in commu-nity facilities and infrastructure, par-ticularly transport.

With Auckland’s population expected to grow by up to one mil-lion people over the next 30 years, eight prioritised Metropolitan Centres are receiving a high level of investment and focus under the Auckland Plan, including Hobson-ville Point and New Lynn.

“Hobsonville Point has dem-onstrated how well large scale commercial and residential com-

munities can be created in major growth nodes,” says Stringer. “We’re been involved in three separate land sales totalling 72,000 sqm in the area, all earmarked for residen-tial and aged care uses.

“We have also been involved in transacting 195,000 sqm of resi-dential development land in New Lynn, demonstrating the evolution of mixed use development. There’s an existing town centre, a sophisti-cated public transport network that has been heavily invested in by a number of motivated parties, and a mandate to build more commercial and residential spaces - and fast.”

Driven by shopper demand“Kiwi Property recently announced it will be investing $36 million in the LynnMall shopping centre, upgrad-ing and expanding the entire facility to include a new outdoor dining and entertainment precinct. Driven by shopper demand and positive growth in the catchment area, Kiwi’s investment is indicative of the level of interest and priority the sector is giving to New Lynn.”

Ageing population driving aged

care investmentIn addition, New Zealand’s age-

ing population is leading to consid-erable investment in developable land by the big operators in the sector.

“Statistics released in June 2015 show that the 65-and-over age group made up 14.3% of the popu-lation in 2013, and that’s projected to reach 23.8% in the next 30 years,” says Stringer. “Opportunities are being realised by the major retire-ment and aged care operators. One such is Summerset Group Holdings Limited, which recently acquired an interest in a 2.5 hectare site in St John’s, one of Auckland’s sought-after eastern suburbs.”

Summerset also acquired the 2.3 hectare former KiwiRail site on Cheshire Street in Parnell, with both sites marketed by CBRE’s John Schellekens and John Holmes.

“Summerset has lifted its build rate target for FY16 to 400 retire-ment units, up from 300 for FY15,” says Stringer. “They are seeing record sales of occupation rights and profit, and experiencing good demand across the country for their

products. Focused on expanding their footprint and offering around the country, the company is well funded, has a good land bank of 25 sites now in place for development, and is well positioned to meet the needs of the growing number of older New Zealanders.”

Institutional investors developing to improve portfolio quality

According to Stringer, another factor is the work currently under-way by a number of major inves-tors to improve the quality of their portfolios.

“At a time when the City Rail Link is providing investment stimulus within the CBD, which we have already seen with the Down-town development and the Aotea precinct next – not forgetting the International Convention Centre – significant investment in CRL sta-tions will materially shift pedestrian linkages in the area. This is driving strategic acquisitions now for future development.

“Additionally, major investors are actively developing in order to improve the quality of their portfoli-os, as their ability to acquire quality investment stock is being stymied by a lack of opportunities. If you look at the work being undertaken by Precinct Properties, DNZ and Cooper & Company for example, their recent announcements all show that they have to develop to do so, which makes strategic land-holdings key.

“So, given what we’re seeing now, with what we know is coming in terms of population growth and the Auckland Plan’s node and transport focus, we’re expecting continued demand pressure for strategic hold-ings adjacent to major infrastruc-ture investment and supporting amenity.

“One of the great outcomes of our recent success is that Auckland will probably see the $180 million of land converted to residential and commercial developments that could have an end value of more than $1 billion.”

SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY 27The National Business Review / August 28, 201526 SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY / The National Business ReviewAugust 28, 2015

Transforming real estate into real ADVANTAGE

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A view of Clinker Place, New Lynn

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Oyster Experiences Year of Growth and Value in Funds Management

To register interest in any of Oyster’s investment opportunities or for further information please contact: James Molloy Ph (09) 632 1287 or email james.molloy@oystergroup.co.nz

■ Auckland 63%■ Hamilton 9%■ Other North Island 6%■ Wellington 22%

Geographic spread of funds management portfolio by

capital value

Geographic spread of investors

■ Northland 4%■ Auckland 27%■ Waikato 26%■ Bay of Plenty 13%■ Other North Island 9%

■ Wellington 7%■ South Island 9%■ Christchurch 4%■ Overseas 1%

Oyster’s most recent successful syndications include the ANZ Business Centre and the Westpac building – both on Corinthian Drive in Albany, Auckland. The ANZ office and retail property had a minimum investment of $50,000, whilst the Westpac building was restricted to 11 investor interests of $750,000 each

63%9%

6%

22%

27%

26%

13%

1%4%4%

7%

9%

9%

We are a country of avid property investors – it’s part of our heritage and we like it. We always have and probably always will.

The famous author Mark Twain once wrote “buy land, they’re not making it anymore” and this is as true today as it’s ever been, espe-cially in New Zealand.

But property investment is not always the easiest concept to get your head around.

David Kitson, Director of Taurus Management Limited, says over the years he’s dealt with many experienced property investors but their number is far exceeded by those interested and wanting to get started.

“It’s one of the best parts of our role – guiding and supporting peo-ple eager for their first investment while also helping experienced investors find the best opportuni-ties.

“We understand the varied needs of investors so we’ve made our approach different to other property investment companies,” he says.

Taurus Management Limited is

part of Taurus Group, a diversified strategic financial firm including Chartered Accountancy, Capital and Finance and Project Manage-ment.

“We have all the expertise here under one roof,” says David Kitson, “so we can deliver property invest-ment integrated with the important principles of other disciplines, and most importantly, chartered accountancy. We believe this chal-lenges the norm, builds relation-ships and trust, and provides a solid offer to investors.”

David Kitson went on to explain the four principles for all property investors.

Finding the right asset As a company managing $100m of commercial and residential prop-erty assets with over 500 investors Taurus has a regular stream of pro-posals. “We are very selective and apply highly critical due diligence to find the best – of the 15 we’ve received in the last year we’ve only pursued two,” he says.

Taurus currently manages nine separate syndicates including:

retail, office, healthcare, services, industrial, warehouse, hotel, hospi-tality, car parking and residential.

It has recently launched Taurus Artemis, an investment in the free-hold of a network of Childcare Cen-tres and has just announced Taurus Tannery, a boutique retail centre in Christchurch.

The syndicates it manages are mostly niche assets and it’s more

likely to support a smaller project with limited investors than big box schemes with hundreds of interests.

“This fits how we like to operate; providing personal service where the investors are big fish in a small-er pool,” he says.

“When it comes to property investment we know it builds con-fidence to have personal and direct access to the syndicate manager.”

Increasing your wealth After all, this is the reason why peo-ple like property investment and one of Taurus’s founding principles is helping wealth grow for com-mercial, personal or community reasons. There are two sources – capital growth and regular distribu-tions.

Taurus team works in partner-ship with investors to deliver the best possible return and being linked to a larger group means it has easy access to other experts.

Making it simpleDarren Crossland, Manager at Tau-rus, explains the importance of a “tell it how it is” approach.

“The tools of our trade are inves-tor relationships and we believe in being resolutely open, transparent and communicative,” he says.

“There’s no doubt this approach leads to the best decisions and results. We explain all the ins and outs and you will always have someone who listens and under-stands what you want from your investment,” he says.

Trust in your managerProperty investment is a relation-ship business and as a New Zea-land company with schemes across New Zealand Taurus understands trust is vital.

“We think our property team is one of the best,” David Kitson says.

“We never shy away from tough decisions. We will always work hard for solutions and are resolute in achieving business and personal goals.”

Taurus Group was established almost 20 years ago. It began as a Business Advisory and Corporate Finance operation and merged in 2000 with a Chartered Accountancy practice. It then developed into an integrated practice with clients nationwide and now has over 40 people based in Christchurch and Auckland.

Being bullish with property investment

28 SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY / The National Business ReviewAugust 28, 2015

n Chartered Accounting Servicesn Feasibility studies n Acquisition strategies n Ownership structuringn Syndicate promotion and distributionn Development strategies and property restructuring

n Banking relationships and negotiationsn Syndicate management - investor relations and communicationn Overseeing: n project and building managementn maintenance, upgrades, remediationn New Building Standards compliancen leasing and tenant negotiationsn sales and marketing strategies

Taurus Services

I MEET WITH BUSINESSMAN Kevin Chapmanoutside his new investment property, this is onlythe second time he’s seen it.

“I’ve seen it online of course, but theinspections and reporting was all done for me.I’ve not really had any need to come out here tosee it.”

The house is hardly impressive. ‘Memorable’doesn’t quite fit the description either. But MrChapman seems delighted.

“You see that there?” He’s pointingat a lacklustre exterior paint job. “That’sweatherboarding, built in the 1960s. You’ll neversee that leak. It’s a solid old thing, but that’s notwhy it was chosen for me.”

‘Chosen for me’ is an interesting term touse when describing a house purchase. Butin this case, it’s appropriate. Kevin Chapmanplayed a very small part in the acquisition of thisinvestment house. Short on time and propertyexpertise, Kevin asked Martin Dunn of City SalesInvestment to take care of his property investmentfor him.

Paying someone to find and purchase ahouse for you isn’t exactly standard practise

Apartments and his housing investment arm, CitySales Investment. “When a client signs me to actfor them, my team analyses hundreds of potentialinvestment properties. We consider things likeprice point, local infrastructure changes, cultureand culture change, date of build, constructionmaterial, size, aspect – many, many things. ThenI start looking at them up close and out of say,100 houses, I usually end up with only three orfour that I am prepared to hang my hat on. It’sone of these that I’ll buy for my client.”

Considerable work, perhaps, but it’s the nextbit which Martin claims adds the most value.

“Once I’ve found the house I’m interestedin, I check it out with an eye that only someonewith my experience can offer. Checks need tobe done much quicker than you’d imagine inthis market, the kinds of houses I’m interested insometimes have multiple offers made on themwithin 24 hours of being listed. I need to find it,check it out and make an intelligent offer veryquickly – which might well mean bidding for itat auction. My clients just don’t have the time toact this quickly, but this is what I do seven daysa week.

Once I’ve successfully negotiated thetransaction, I’ll carry out settlement on theirbehalf, then find tenants and manage thehouse for them through City Sales PropertyManagement. Many of my clients have never, andwill never see their investment house in person.”

It’s a very buoyant market inAuckland at the moment and itfavours the Vendor. As a Buyer’sAgent, I even the playing field.

– Martin Dunn

Back inside Mr Chapman’s house he walksme around three generously sized bedroomsand explains to me Martin’s reasoning behind hispurchase. “It’s the new ferry terminal you see,only a few minutes’ walk away. When I first metwith Martin he stressed to me the importance ofinfrastructure change to an area, which bringswith it a culture change. Birkdale used to beregarded as poor and in some places, downrightdangerous, but now with three road accesspoints and a ferry service connecting it to theCBD, Birkdale is becoming a very desirablearea.”

Mr Chapman discussed a couple of otherareas with Martin, but decided on Birkdale afterbeing explained the effects of infrastructurechanges on an area.

“He [Martin] was quite straight talking whenit came down to it. He wouldn’t entertain mythoughts on Albany even for a second and hedidn’t hold back from correcting my expectationsregarding areas and values. I’m pleased I got himinvolved, my brother has been trying to buy fora few months now. Martin had my investment allwrapped up and managed within a few weeks ofme signing up with him. He’s now speaking withmy brother.

I operate from three different offices aroundAuckland and I’m often working weekends. WhenI’m home I just want to be home with my family, Iwas happy to pay for his service.

I’ll be looking to purchase again in the next6-12 months. I wouldn’t think of doing it on myown anymore.”

City Sales Investmentpurchases Aucklandhousing on an investorsbehalf. Schedule aconsultation with MartinDunn or request aninformation pack,invest@citysales.co.nz or(09) 3030 601.

Outsourcing hisway to wealthWhen Kevin Chapman set out to investin Auckland property, this wasn’t quitewhat he had expected…

Based on an actual CSI client. Names and personaldetails have been changed.

here in New Zealand. But the Buyer’s Agentmodel is not a new thing. In theUSA it’s commonplace tocommission an agent totake responsibility foryour house purchase,Buyers Agents aregaining popularity tooin parts of Englandand Australia. Butwhat is it, exactly, thata Buyer’s Agent does?

“Everything”, saysMartin Dunn, headof both CitySales

SUPPLIED CONTENT

Request an information pack:invest@citysales.co.nz(09) 3030 601www.citysales.co.nz/invest

I don’t have the time to do whatMartin does. – Kevin Chapman

SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY 29The National Business Review / August 28, 2015

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WARNING The law normally requires people who offer financial products to give information to investors before they invest. This requires those offeringfinancial products to have disclosed information that is important for investors to make an informed decision. The usual rules do not apply to this offerbecause there is an exclusion for offers where the amount invested upfront by the investor (plus any other investments the investor has already made inthe financial products) is $750,000 or more, or where you qualify as an eligible investor. As a result of this exclusion, you may not receive a balanced set ofinformation. You will also have fewer other legal protections for this investment. Investments of this kind are not suitable for retail investors. Ask questions,read all documents carefully, and seek independent financial advice before committing yourself. The Information Memorandum contains full details of theinvestment including how the projected return for the investment is calculated and the rates associated with the investment and return. This document isnot an offer of financial products or other invitation to the public to subscribe for any financial products. Applications for investment may only be made onthe form set out in the Information Memorandum and only by investors certified as eligible investors or investors investing a minimum of $750,000 underclauses 3(3)(b)(i) and 41 of Schedule 1 of the Financial Markets Conduct Act 2013. Returns are not guaranteed.

For a copy of theInformation Memorandum& valuation, please contact us;

• Managed Investment Scheme,with investors each owning aproportionate interest.

• 350 interests of $50,000 each.Minimum subscription of $100,000available only to eligible investorsor a minimum investment of$750,000 under clauses 3(3)(b)(i)of the Financial Markets ConductAct 2013.

• Historic, unique buildings, fullyrestored.

• Restored and new buildings 100%of New Building Standard.

• Proposed Loan to Value Ratio of44.4% on purchase price.

• 64 Individual Tenancies with anapproximate WALT of 5.0 yearsdepending on current leaserenewal negotiations.

• Purchase Price of $31.5m.

• Equity being raised of $17.5m.

• $9.6m is already fully underwritten.

• Overall projected yield of 8.6%based on LVR of 44.4%

• Quarterly cash distributions.

• Scheme will be professionallymanaged by Taurus Tannery Ltd.

• Scheme will be overseen byFoundation Corporate Trust asSupervisor.

David KitsonTaurus Group Ltd,drk@taurusnz.co.nzDDI: 03 345 8834,Mob: 021 722 231

Darren CrosslandTaurus Group Ltd,dsc@taurusnz.co.nzPH: 03 366 6087Mob: 027 801 7103

8.6%PAPROJECTED

PRE-TAX CASHRETURN FORFIRST YEAR.

INVESTMENT OPPORTUNITYBOUTIQUE RETAIL CENTRECHRISTCHURCH64 INDIVIDUAL TENANCIES

DAVID KITSON: Director of Taurus Management Limited

SITUATED ON THE WAIOURU peninsula in Auckland’s East Tamaki, Highbrook is firmly established as New Zealand’s premier busi-ness park.

Bordered by the picturesque Tamaki River, the 150 hectare estate has developed rapidly over the last decade with key infrastructure, including direct access to SH1, facilitating its transformation from a successful horse stud into an award winning business destination.

Owned by the NZX listed Goodman Prop-erty Trust it’s a world class development that provides its corporate customers with prop-erty facilities purposebuilt to meet the specific operational requirements of their businesses.

Surrounded by 40 hectares of parklands and esplanade reserves, and with a range of amenities to support its commercial func-tion, Highbrook offers an exceptional working environment for the 70 companies that have already chosen to locate there.

These businesses, which represent a diverse range of industries, support a daily workforce of around 5,000 people.

CEO John Dakin emphasised the success of Highbrook. “Around two thirds of the way

through its planned development Highbrook has set the benchmark for new business accommodation.”

With more than 40 prime industrial and commercial buildings already developed, and a combined value in excess of $850 million, it’s a substantial estate that is continuing to attract strong levels of enquiry.

John Dakin said “Sustained customer demand is supporting a heightened level of development activity with eight new projects, totalling over $100 million, announced in the last 18 months. It’s a substantial workbook that reflects the unique attraction of this award winning estate.”

With limited vacancy in prime space throughout Auckland, the strategic location and quality of Highbrook means it presents a compelling business case for customers seek-ing design-built property solutions.

Metro Performance Glass is a business that has recently chosen to relocate to High-brook. The new 16,700 sqm office, manufac-turing and distribution facility received the excellence award for industrial buildings at the Property Council of New Zealand Awards

in June 2015. The best in category award acknowledges

the scale and success of the development, assessing its merits across a broad range of criteria. It’s another award for an estate where the focus has always been on quality and con-sistency of design.

A sustainable development philosophy is also being reflected in the innovative property solutions that Goodman is delivering at High-brook. The latest developments showcase the very best in energy efficiency, building tech-nology, systems and materials.

It is also the home of New Zealand’s first Green Star industrial building, with the Cou-rierPost facility achieving its 4 Star Industrial Design rating in 2009.

Steel & Tube and Ford are two more sub-stantial businesses to have had facilities built in the last 6 months with new 7,770 sqm and 10,150 sqm warehouses developed since the completion of the Metro Performance Glass premises in December.

Existing customer relationships have also generated new development commitments from Big Chill, Machinery House and Virid-

ian with 22,500 sqm of projects underway for these businesses.

John Dakin said “These are the latest cus-tomers to extend their property requirements with us and we are extremely pleased to be facilitating their business growth.”

To take advantage of the current demand Goodman is undertaking two industrial developments on an uncommitted basis. The new 3,000 sqm and 6,300 sqm warehouses are of a size and design that will appeal to a range of business occupiers, with scheduled completion dates in early 2016.

Jarrod MacGregor said, “With Highbrook fully occupied, continued customer demand is the catalyst for these new development ini-tiatives. We expect them to lease quickly and medium sized businesses seeking high qual-ity industrial space should act now to secure new premises early in the New Year.”

It’s a similar story for commercial occupi-ers too, with a shortage of available space being the catalyst for a new 3,137 sqm office building.

The new development will neighbour The Crossing, a retail and commercial centre that provides amenity and support services to the business park customers and wider East Tamaki catchment.

The Crossing is Highbrook’s town centre. It features multiple buildings arranged around a podium base and linked by an open air pedestrian plaza. Completed two years ago, it is a highly successful development that incor-porates office, retail, health & fitness and hos-pitality businesses together with a conference centre and serviced accommodation.

Situated on a high profile site adjoining The Crossing, the new three storey office building is located among other professional service operators. Childcare, banking, post and further food and retail options are also close by.

Fronting directly onto Highbrook Drive the new building will offer uninterrupted views out over the Tamaki River and across Auck-land’s volcanic cones.

Jarrod MacGregor said, “With floor plates of 1,000 sqm it’s a flexible design that can be configured into smaller suites. With over 28,000 vehicle movements a day along High-brook Drive it also provides valuable signage opportunities.”

Scheduled to complete in November 2016, the new office building continues a devel-opment programme that is delivering the Highbrook masterplan, converting a strategic greenfield site into a world class business park.

SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY 31The National Business Review / August 28, 201530 SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY / The National Business ReviewAugust 28, 2015

Auckland +64 9 366 1666 Wellington +64 4 499 1666 Christchurch +64 3 341 8210 www.jll.nz

Delivering award winning service to helpyou make the right real estate decisions

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Market leading researchto help you make the right

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Highbrook – a world class business park

TAKAPUNA OFFICE VACANCY HAS fallen to its lowest level in 10 years as options for tenants dry up. Vacancy surveys undertaken by JLL show the market has a 3.9% vacancy. A combina-tion of restricted new supply to the market and a surge in demand from occupiers has been the driving force behind Takapuna’s low vacancy rates, which have been sitting in the low 4% range throughout 2015 according to JLL’s latest research.

Head of JLL’s North Shore team David Mayhew says, “The Takapuna market con-tinues to be a highly sought after destination for busi-nesses on the North Shore

and with limited supply coming online, landlords are feeling confident in respect to occupiers.”

“Commercial occupiers are becoming increasingly attracted to Takapuna not only for its coastal environ-ment but due to its ability to provide a balance between cost efficiency and quality in a decentralised location, just a 10 minute drive from the Auckland CBD,” says Mayhew.

Takapuna has stolen the spotlight in terms of subur-ban rental growth increasing by 5.9%. Decreasing vacancy rates are shrinking tenants’ options in the area and put-ting the bargaining power in

the hands of land owners, pushing tenants to com-pete more on price for com-mercial space.

Mayhew con-tinues, “Rents are forecast to move upward over the short-term with no indication of demand from tenants less-ening. As market enquiry continues to increase, we expect to see more property owners explore the options of redevelopment and refur-bishment of their buildings to take full advantage of the current conditions.”

Occupier enquiry remains

robust and is push-ing rentals higher,

nearing the peak last seen in late 2007. Both the upper and lower

series of rental figures saw a strong uplift over the last six months with an

increase of $10psm, as the average rents are now sitting at $241psqm.

With the current mar-ket conditions making the option of new development more viable, there have been several landlords evaluating their options to redevelop or start new projects in the area. 1 Byron Ave which is already

under redevelopment, will add an additional two new floors to the supply, approxi-mately 2,000 square metres of much needed office space in Takapuna in the first half of 2016. Also scheduled for release to the market around that time is Building 4 at 61 Constellation Drive in Rosedale as well as 33-45 Hurtsmere Road which has undergone redevelopment. This additional space howev-er is expected to be leased up quickly due to high occupier

demand in the area and larg-er spaces being increasingly more difficult to acquire.

The future for Takapuna looks very positive and the opportunity to capitalise on this trend exists for land-lords. Commercial agents Brandon Morley and Marg Mills who focus on the North Shore markets are currently working with three large cor-porates with 1,000sqm plus requirements looking to relo-cate to Takapuna, indicating further demand.

Takapuna office vacancy reaches historic low

JLL North Shore team head David Mayhew

Built to a consistent design that is setting the standard for business space these new facilities will feature:

• Warehouse plus office, canopy and yard • High-stud and large canopies with secure yard areas • Attractive office spaces with excellent exposure • Well-presented landscaped premises • Generous on-site car parking

For Lease

3,000 or 6,300 sqmWarehouses

Looking for warehouse space?

www.highbrook.co.nz

The new Mainfreight facility shown above is similar in design and size to the new warehouses being developed.

Jarrod MacGregor – Portfolio Manager 021 452 895 or jarrod.macgregor@goodman.com

CONTACT:

Bruno Warren – Development Manager 021 506 010 or bruno.warren@goodman.com

>

New builds provide fresh opportunities to bring your business to Highbrook.

The new three level commercial building in construction on Highbrook Drive, Highbrook. Available for lease, completion November 2016

OCCUPIER DEMAND BACKED by stronger eco-nomic performance is being felt in the Auckland Industrial market, trigger-ing new development and moving rental levels higher.

Strong competition between occupiers for space means that land-lords are now in a posi-tion to drive increases in rentals along with dropping off incentives. This has recently started to filter down through to the secondary market where there has been an increase in rents for the first time since 2010.

National Director of JLL Indus-trial Sam Smith says, “Landlords are now in a controlling position relative to tenants which is driving strong rental growth, especially in the secondary end of the market.”

Smith adds, “Until now there

has been very little move-ment in the JLL series for prime industrial rents in the last 5 years but we are now seeing

a significant increase in secondary rental fig-ures.”

JLL research states that prime and second-

ary rents are now near the highs that were last seen before the Global Financial Cri-sis, averaging NZD130 per square metre and

NZD104 per square metre respectively. Prime rental figures increased 2.2%

during the first half of 2015 while secondary rental figures increased by 10.6%.

Industrial vacancy across the Auckland region is continuing to fall and is now at 2.9%. Occupiers are now being forced into lower

grade and secondary premises, with options remaining limited.

“We are finding that occupiers are now steering toward secondary stock opportunities and in some cases where they cannot find a suitable option they are forced to look for build-to-suit options to supply their accommodation needs,” says Smith.

With strengthening rents and diminishing options for occupiers there has been a continued drive in new build development in the industrial market. An increasing number of these new develop-ments are speculative in nature with developers more confident of tenant demand and leasing condi-tions in the Auckland market.

Ben Curran, industrial sales and leasing agent says, “The demand for new build space remains healthy and the majority of new development is still primarily focused in Auckland’s southern markets. This is not surprising

given the fact that this is where the vast majority of greenfield devel-opment land is located.”

Roughly 61,000sqm of new build space entered the industrial market over the first half of the year with notable developments including Duplex and Flex 2 in the Auckland airport precinct and Goodman’s speculative builds at Highbrook which will provide 3,000 and 6,000sqm warehouses, due for completion end of 2015.

Curran adds, “This is likely to release some of the demand pressure that currently exists and provide more options to occupiers that are unable to find adequate space.”

A number of new developments will provide some relief to the critical shortage of stock with over 105,000sqm currently under con-struction. This figure is expected to increase over the coming year, as more space is demanded by occupiers.

Limited stock and high demand driving up industrial rents

SAM SMITH: National Director of Industrial

BEN CURRAN: Commercial Sales and Leasing Agent

The old adage ‘location, loca-tion, location’ has never gone out of fashion in the property investment world because, while it might be a cliché, it is a gold standard that investors ignore at their peril.

There is an equally important factor to consider … cost. Com-mercial developers involved in the rebuild of central Christchurch have been plagued by cost over-runs, not just from spiralling con-struction costs but because the government-imposed blueprint had the effect of restricting the number of building sites and pro-moting scarcity, inflating land val-ues.

A notable exception has been one of the extraordinary success stories of commercial property development within the region – the 180 hectare Izone industrial park at Rolleston. As the NBR’s own Chris Hutching reported in July, “Izone cuts it with a sharp price focus,” with lots selling some 40 to 60 percent cheaper than similar industrial land only a few minutes away but within Christchurch city boundaries. It is New Zealand’s largest, fully

consented industrial park. It was established by the Selwyn District Council 10 years ago and is man-aged for the council by Hughes Developments.

So Izone certainly hits the ‘price’ button, but how about its location? It wasn’t too long ago in the history of commercial development in Canterbury that Christchurch was the key place to be.

‘Greater Christchurch’Out-of-the-city satellite locations were perceived as less attractive to the investor because they were not as popular with potential tenant companies and their staff. Unlike Auckland, Christchurch employ-ees have traditionally not had to commute more than a few kilo-metres to work and were resistant to travelling another 10 minutes to Rolleston.

That is no longer the case. Even before the earthquakes the Selwyn District and Rolleston town were the fastest growing in the country in terms of population and eco-nomic development. Add into that mix much improved motorway connections – which significantly reduce travel times between cen-

tral Christchurch and Rolleston – and the earthquake-induced migration of businesses to satellite areas, and what you have now is a single, ‘greater Christchurch’ com-mercial real estate market.

Sales the proofEven before the Canterbury earth-quakes Izone proved popular, with land selling at a rate several years ahead of predictions.

Izone has taken full advan-tage of this new socio-economic landscape offering property buy-ers very competitive packages that exemplify the dual cost and location investment criteria. Some 65% of the project is sold, with the final block of land (Stage 7), released for sale last month, already attracting keen interest.

The success of Izone’s location-and-cost strategy is evidenced by its sales figures. During an 18 month period ending in Decem-ber 2014, the park sold as much land as the combined sales in all business parks within the boundaries of Christchurch city. Buyers have ranged from busi-nesses looking to locate to, or relo-cate within, the Christchurch area,

to investors planning to attract good tenants and accrue value.

With Izone located at the heart of central Canterbury’s agricultur-al production, a large proportion of the more than 60 companies located within the park service the rural sector and/or on-pro-cess and distribute food and tex-tile products. Allied industries are

now, in turn, moving in to service their neighbours. With the huge Central Plains Water irrigation scheme, currently under con-struction, predicted to add many millions of dollars in added pro-duction and ongoing food indus-try business activity, Izone could not be better positioned for busi-nesses or investors looking to put

themselves ahead of this reliably predicted growth.

The final ingredient that points to a very bright future for those businesses or investors associ-ated with Izone is that the busi-ness park is also home of Port of Tauranga’s new fully operational intermodal freight hub – Metro-port Christchurch, Canterbury’s

first inland port. Izone’s Stage 7 land, now available for purchase, includes sections on the Metro-port boundary.

So the stage is set for a further round of investment and growth, offering excellent prospects for businesses and investors looking to purchase commercial property in Canterbury.

Izone ticks all the boxes

32 SPECIAL REPORT: INVESTING IN COMMERCIAL PROPERTY / The National Business ReviewAugust 28, 2015

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SDC2

7921

_NBR

26x

4

Land sale or leaseback options available now www.izone.org.nz or phone 0800 569 455

• Izone: New Zealand’s largest industrial development.

• Selwyn: New Zealand’s fastest growing regional economy.

• Port Of Tauranga: New Zealand’s most successful port operator.

• Metroport Canterbury: Canterbury’s only operational inland port.

• No developers contribution fees and free from construction ties.

Secure your position portside today.Prime locations with tailored boundaries next to Port of Tauranga’s Metroport freight forwarding hub.

On The Right Track, Right Now.

During an 18 month period ending in December 2014, the park sold as

much land as the combined sales in all business parks within the boundaries of Christchurch city