Future of Property Investment

Transcription

1 Future of Property Investment The views expressed in this presentation are my personal views from my experience in investing in commercial real estate since Bryce Barnett, FCA, FPinz Executive Director Augusta Capital Limited Bayleys

2 Theme of the Conference Property at the Peak - What Peak? - What Trough? - What Opportunities? - What Next? Commercial Property always has and always will be a long term investment and we should focus on sustainability of yield, which will then lead to capital preservation and growth. Bayleys

3 Everyone has and everyone is entitled to have a different view of the market as to when is the best time to buy or the best time to sell. If this was not the case, would we have a liquid market? The following pages are sharing information that is important for investors to consider when making future investments. Bayleys

4 NZ increasingly seen as a Stable Safe Haven Bayleys

5 Global uncertainties on the rise Trump new leader of free world BREXIT Nationalism across Europe North Korea Revanchist Russia Terrorism Chinese South China Sea claims Post GFC recovery still anaemic Bayleys

6 Bayleys

7 Population growth: Auckland dominates Population Last 12 mths Last 10 yrs pa Next 30 yrs pa Projected Population Auckland 1,614, % 1.6% 1.4% 2,326,200 Wellington 504, % 0.8% 0.5% 571,300 Canterbury 600, % 1.1% 0.9% 767,300 Rest of NZ 1,872, % 0.8% 0.4% 2,106,400 NZ 4,693, % 1.2% 0.9% 5,923,100 Bayleys

8 Auckland Economic Powerhouse 36% Of National Total 54% of New Jobs ,000 White Collar Jobs Bayleys

9 Yield Changes 2015 to 2016 New Zealand Australia 6.50% 6.00% 5.60% 5.50% Germany Singapore France UK Hong Kong 3.70% 3.20% 3.70% 3.50% 3.25% 3.15% 3.25% 3.25% 2.80% 2.70% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Source: Cushman & Wakefield, Bayleys Research

10 Global uncertainties on the rise Bayleys

11 Drivers of Growth Infrastructure Tourism Port & Distribution Distribution Hub Golden Triangle Oil, Gas, Dairy Tourism Govt. Film, IT Wine Tourism Education Bayleys

12 Bayleys

13 Key Points Sustainability of Yield WALT Lease Terms and Lessee Obligations Tenant Covenant Quality Building structure Staff facilities in the building Proximity to public transport Proximity to distributions roads Environmental qualities Flexibility/ability to change use Bayleys

14 Future proof buildings for change of technology Electric car charging Structure and provision for I.T reorganisation Un-interrupted power supply Macro Location Regional cities and their future as investment Classes of product in regional New Zealand Retail Office Industrial Recognition of CAPEX commitment is short, medium and long term. Bayleys

15 CAPEX Identification Substantial pressure on tightening yields. Real estate agents use this to benchmark investments, reviewing at high level the net income and its sustainability. Insufficient recognition is placed on the quality, life cycle, of major plant and equipment, services, yards etc. in investments. THIS MUST CHANGE Bayleys

16 Purchasers need to spend time and money to fully understand potential CAPEX liability to ensure the price paid and the CAPEX provision to ensure the price paid and the CAPEX provision made support a sustainable yield. Vendors must manage their building knowing that it is prudent not only for their purpose but it can be imparted on any potential sale which should be reflated in price. Bayleys

17 Valuers this should be a key part of their valuation and should be reflected in yield calculations to a much greater degree than what it is now. Bayleys

18 Emerging New Investment Opportunity As New Zealand focuses on tourism, food and other primary industry maybe we start considering more favourably: Hotels Motels Cool stores/refrigeration * All of the above need close due diligence on plant and equipment. Farms Chicken farms Kiwi fruit farms Bayleys

19 Gems to Leave Sustainability of yield is critical. - Capital Growth will follow. Growth of population. Roading distribution networks. Tenants requirement now and flexibility for the future. Affordability of efficiencies. Bring in the building surveyor. Inform the valuation profession of changes and get them to be leaders. Bayleys