MHP Newsletter October 2016October 5, 2016
2016 has shaped up to be quite an interesting year for the property market. Macro factors which are contributing to the increased demand for commercial property include interest rates hitting record lows and the forecast very low rate of inflation.
Correctly sourced and funded commercial property is looking very attractive as an investment proposition in this environment, however a shortage of good stock is a significant issue nationwide.
Assets displaying the key fundamentals of location, build quality and tenant covenant are being snapped up quickly in the main centres, with competition among investors – both New Zealand and overseas-domiciled – compressing yields further.
In this newsletter we cover some key additions to our management portfolio, our new Properties in Focus series as well as the green credentials awarded to three Christchurch office assets under our management.
Please get in touch if you have any comments or suggestions – we look forward to hearing from you.
Comments from Ron Mackersy
We have been talking with banks in the last weeks reviewing their attitude going forward for syndicate investments.
There is certainly a change in thinking from all banks – it is almost as if they are self policing looking carefully at deals going forward. Development projects are out of favour.
Although base interest rates continue to slide bank margins are on the increase. Pricing with margins are generally 60 to 75 points higher than three months ago. Banks are clearly having difficulty in attracting local deposits, so the cost of funds is increasing. This in turn will lead eventually to cap rates (ratio of rent to purchase price excluding costs) moving back up not down.
In the meantime, get used to gross returns for quality properties being between 6% and 7.5% – lower than what we have achieved before.
Interesting times ahead.
News from Dale Robertson’s desk
Last month I attended Property Council’s National Conference in Queenstown. As always it was an impressively-run and well-attended event, with speakers and delegates from around New Zealand and Australia. Among the speakers, which represented the property, finance and health & safety arenas among others, was Australian ex-PM Paul Keating and Minister for Economic Development Steven Joyce.
I took away the following key themes from the event:
- The remarkable speed at which technology is changing and developing. Perhaps more than at any other time in the recent past, technological advancements are now affecting all tenants and their business models. This makes for exciting times, but it also means tenants’ properties may become obsolete for them in as little as five years due to technology progressing in leaps and bounds.
- There are no logical reasons for interest rates or inflation to rise in the current environment. This will require adjustment to cope with the impacts of very low or no inflation.
- Positive market conditions may continue for the next five to 10 years.
- More economic methods of delivering buildings, both residential and commercial, are being developed.
The interest rate and inflation situation, and increased demands from tenants, mean there will certainly be some exciting challenges for property owners and managers going forward.
“Going forward, companies and governments need leadership and courage” – Australian ex-PM Paul Keating at the recent Property Council conference in Queenstown
Over the past year, the size of MHP’s management portfolio has more than doubled. Along with this increase in size has come an evolution in the constitution of our portfolio. We still manage a number of high quality industrial properties, however we have begun to balance this with the addition of several prime new office and bulk retail assets around the country. While these buildings tend to require more management input than industrial properties, they are excellent assets and are often considered trophy holdings by their owners.
Properties recently added to our management portfolio include:
- Progressive Engineering facility, Invercargill
- Tyremax facility, Invercargill
- Asmuss Steel facility, Christchurch (pictured below)
- Kathmandu building, Christchurch CBD
- Vodafone ‘InnoV8’ building, Christchurch CBD
- Trustpower HQ, Tauranga
- Concision Panelised Technology facility, Rolleston, Christchurch
- Southern Hospitality Building, Manchester St, Christchurch
In Queenstown, the redevelopment and new fit-out of the former Mitre 10 premises at Remarkables Park is well underway and Harvey Norman is confident of being open for Labour Weekend in its new space. French bakery Ma Boulangerie, which will occupy a small unit in the property, is on track to be open before Christmas.
Asmuss Steel building, Christchurch
MHP website and LinkedIn page
Throughout 2016 we have boosted our digital presence through our new website and LinkedIn page. We are using both these channels to share the latest updates about MHP, news about tenants in our management portfolio and other relevant links. We’d like to encourage you to follow us on LinkedIn and feel free to comment on the posts and discussions.
Property in Focus: Trustpower HQ, Tauranga
In the first of a bi-monthly series profiling the properties in MHP’s management portfolio, we recently had a look at Trustpower’s stunning new headquarters in Tauranga. This is an award-winning, landmark building which we are proud to manage on behalf of its investor owners.
Trustpower HQ, Durham St, Tauranga
MHP-managed buildings earn green credentials
Two flagship assets in MHP’s management portfolio – the Kathmandu and Vodafone buildings in Christchurch’s Innovation Precinct – have been awarded 5 Green Star NZ – Office Design 2009 Certified Ratings from the New Zealand Green Building Council.
In addition, another MHP-managed office building in Christchurch – the IAG building at 14 Show Place, Addington – recently became the first building in New Zealand to achieve a 5 star NABERSNZ whole building rating, following a refurbishment project undertaken by IAG and Goodman.
IAG Building, 14 Show Place, Christchurch
Team member profile
Kirita joined MHP as a Senior Property Manager in our Christchurch office in April 2016.
Prior to joining MHP, Kirita was a commercial property manager for CBRE, undertaking full asset management of a small diverse portfolio of retail, industrial and commercial buildings based in Christchurch.
Kirita has a passion for property and has nearly 20 years’ experience in the industry, including in the residential and government sectors. She has built a reputation for being efficient and customer focused with a ‘can do’ attitude, forming strong working relationships based on trust and delivering on agreed targets.