Investment update from Ron Mackersy

September 26, 2018

Part of Mitchell Mackersy’s strategy of offering a steady pipeline of high-quality investment opportunities is considering which geographical areas in New Zealand currently offer the best returns.

In today’s low-yielding investment climate, this leads us to look at selected regional markets where purchase prices still reflect a superior rate of return, or where market dynamics are particularly compelling for various reasons. Two markets of particular interest at the moment are Tauranga and Wellington.

Tauranga is part of the ‘golden triangle’ between Auckland, Hamilton and Tauranga. It is a fast-growing centre of over 200,000 people with a major strategic asset, Port of Tauranga (New Zealand’s premier port by volume). Major exports include logs from the vast plantations in the Rotorua area, kiwifruit and dairy produce, while significant imports include fuel (stored and distributed from the Gull depot at the port), stock feed for the dairy industry, and containers bound for the big distribution centres south of Auckland. These factors make Tauranga a key growth hub where we believe property investments are likely to perform well in the future.

Among our investment purchases in Tauranga in the past few years are the Trustpower HQ on Durham St and several industrial/warehouse buildings in the fast-growing Tauriko Business Estate.

In Wellington, the A-grade CBD office market is very compelling at the moment. Following the November 2016 earthquake, there is virtually no vacancy in Wellington CBD offices – with nearly 100,000m2 of office space removed from the market after the earthquake. While new developments are underway, it will still be another two to three years before the first of these are ready for fit out, and even longer before any significant amount of new office space enters the market. Tenants are competing for the extremely limited amount of vacant space and quality buildings with higher seismic ratings are in huge demand. In addition, rents for new A grade buildings must rise further due to the high cost of construction.

A Mitchell Mackersy investor group owns the TradeMe headquarters on Market Lane. We are also pleased to have the flagship Spark Central building on Willis St under contract, which has recently been offered to our investor group.