Commercial and industrial property’s time in the sun
Total Property - Issue 4 2018
The commercial and industrial property sector certainly has some compelling factors in its favour. With sub-4% term deposit rates on offer from the main trading banks, having a liquid bricks and mortar asset that generates an income while (hopefully) increasing in value over time is resonating with a growing number of investors.
Interest rates are tipped to stay low for the foreseeable future and with declining yields for residential investment property in most parts of the country, and new criteria and rules around residential investment purchases, the commercial and industrial sector is understandably ticking boxes for many.
While commercial yields have tightened in recent times, they still largely outpace the residential sector and regional New Zealand is attracting increasing attention.
Pete and Liz Cullen have traded a life in farming for one as commercial property investors and in doing so, have swapped active investment for passive assets.
The Cullens have been gradually divesting their rural landholdings in the Whanganui region as their family’s succession plan has changed, but started diversifying their property portfolio by acquiring commercial interests back in 2000.
“We invest in Whanganui because that’s our home turf and there’s some good buying to be had,” says Pete Cullen, who is now actively involved with a number of commercial redevelopment and add-value projects.
The Cullens’ property portfolio spans the commercial and industrial sector and includes Whanganui’s Salvation Army premises, the new Animates retail building, Rabobank premises, Ministry of Education offices, storage facilities, Corys Electrical, a motor service garage and retail premises for a hairdresser, beauty salon and Liquorland.
Another property investor who sees real value in keeping things local is Nelson-based Sean Marr, whose core business is the development and manufacture of food processing machinery.
Marr recently completed the purchase of two buildings in Tahunanui, with good long-term leases in place to respected operators NZ King Salmon and Datacom, who Marr has close business dealings with.
His underlying philosophy when it comes to buying commercial and industrial property is: “buy buildings where people have jobs”.
“Good tenants that have an active local workforce is what I look for as these are the businesses that underpin the economic growth of any region,” says Marr.
Kurt Gibbons’ company, Gibbons and Co., has been at the forefront of quality multi-unit residential builds across Auckland and Wellington but balancing his residential portfolio with commercial property development and add-value stock, has worked well for Gibbons.
“It’s allowed us to invest into bigger assets and means we deal with businesses and corporates, rather than homeowners or investors,” he says.
He’s securing high profile sites in mainly central Wellington and central Auckland and as with all property – regardless of the sector – it’s about location.
“Whether a market is currently oversupplied or undersupplied, its ongoing success will come back to location,” says Gibbons.
If outright property purchase is not an option for a would-be commercial/industrial investor, syndicated property options could fit the bill.
Mark Francis, Augusta Capital Limited managing director, says professionally-managed property funds such as those Augusta offers give access to a range of different sectors including commercial, industrial, tourism and residential - all from as little as $10,000.
“Such funds have historically been the domain of high net worth private investors, family trusts and institutions, but are now appealing to the changing face of New Zealand property investors including Generation Y and millennials.
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