Commercial Property’s ethnic melting pot
Total Property - Issue 4 2016
Auckland City is fourth in the world in relation to the ratio of its foreign-born population which is made up of 220 ethnic groups.
For ethnic owners in the commercial and industrial sectors, location of properties is generally less important with the building type, use, and zoning classification the predominant drivers.
Being used to long commutes in their home countries, travelling times and distances are not general constraining factors for determining where a workplace or investment property is situated - with the exception of retail properties where location determines foot traffic volumes.
Motels have proven popular - meeting the Government’s income-producing ‘investment’ criteria while also providing immigrants with a residence and business in one transaction.
The main ethnic groups buying commercial property are:
Many Chinese immigrants in the 1960s to 1980s, worked in fast food outlets, factories, and low-skilled menial labour jobs – gradually moved up Auckland’s commercial property ownership ladder from workers and tenants to landlords.
However, as a result of China’s renown one-child family policy Chinese migrants now coming to New Zealand now are far wealthier than any previous generations with buying budgets easily up into the $5 million to $10 million bracket.
Chinese-descended commercial property owners take long-term views on ownership, and are very conscious of yields.
Like the Chinese, the Indian sector has moved from traditionally owning dairies and convenience stores, to now owning industrial investment properties and retail blocks up to the $2-$2.5 million mark. Indian migrants prefer high turnover product retail premises with restaurants also being popular purchases. They tend to shy away from office properties.
In Britain, commercial property is viewed as ‘out of reach’ for the average person but migration to New Zealand, makes entry-level valued commercial property ownership more achievable.
Many British migrants are traditionally skilled tradespeople – plumbers, electricians, carpenters, painters, roofers and satellite dish installers. More recent immigrants have skills in the IT, communications and digital technology sectors. Owner occupiers seek premises for professional services and consultancy-based companies employing up to eight or nine staff. The likes of converted city-fringe villas in mixed-use zonings are attractive, as are low-rise stand-alone office premises in bigger suburban centres.
The South Africans profile is similar to the British but the decline in the value of the South African Rand over the past decade has seen their commercial property trimmed by about 28 percent. The preference of South African migrant investors often replicates that of multi-generational Kiwis dabbling in commercial property.
The Korean sub-sector stays with what it knows with migrants having a preference for liquor retailing businesses along with sushi outlets, restaurants, dollar stores, and unlicensed cafes. Automotive related premises like repair garages, auto-electrical and panel beating workshops are also popular Korean migrants.
While the investment amounts are sizeable – about $6 million to $10 million spread across multiple property portfolios – the number of Russian commercial property owners is comparatively small. Like South Africans, Russian investors chase yield as a primary stipulation for their capital return – with virtually all purchases being as investments rather than for owner/occupier purposes.
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